Can You Discharge Medical Debts in Bankruptcy?
Health care for Americans can be expensive. Many Americans face financial hardships due to medical bills. Research found that in 2019, 137.1 million Americans faced financial hardship because of medical costs. If you are struggling with medical debts, you may be wondering if your medical debt can be discharged in bankruptcy. So, can you discharge medical debts in bankruptcy? The answer is yes. Filing for bankruptcy can be an effective way to eliminate or reduce overwhelming medical bills. Read on to learn more.
Medical Bills in Bankruptcy
In bankruptcy, debts are classified into two main groups: unsecured and secured. Secured debts are those debts that are backed by collateral. A collateral is an asset that a creditor or lender can seize if the debtor fails to pay back the loan. Examples of secured debts include mortgages and car loans. On the other hand, unsecured debts do not have any collateral promised to the lender. Examples include credit card debt, medical bills, and personal loans. Within these two categories of debts, some debts are considered priority, and others are considered non-priority. Priority debts get special status in bankruptcy. These debts must be paid before other debts are addressed. Medical bills are considered non-priority unsecured debts. Non-priority unsecured debts are typically discharged at the end of the bankruptcy process. Apart from medical bills, other examples of non-priority unsecured debts include credit card debt and personal loans.
Chapter 7 Bankruptcy and Medical Debt
There are two types of individual bankruptcies. The first is Chapter 7 bankruptcy. Chapter 7 bankruptcy involves the bankruptcy trustee selling the debtor’s non-exempt assets to pay off creditors. At the end of the process, most unsecured debts, including medical debts, are discharged. Chapter 7 bankruptcy typically takes a few months. Not everyone qualifies for Chapter 7 bankruptcy. To qualify, you must pass the means test. Your income should be below the median income in your state.
Chapter 13 Bankruptcy and Medical Debt
Chapter 13 bankruptcy is what you file when you are ineligible for Chapter 7 bankruptcy. With this option, you create a plan to repay your creditors over the course of three to five years. You use your disposable income to pay off debts. Typically, medical debts are included in a Chapter 13 repayment plan. However, at the end of the repayment period, any remaining medical debts and other unsecured debts are discharged. Since part of the debt is repaid, Chapter 13 bankruptcy can allow filers to preserve their relationships with healthcare providers, which can be important for a filer’s future health and well-being.
Other Ways of Getting Rid of Medical Debt
There is no such thing as medical bankruptcy in Florida. In other words, you cannot limit your bankruptcy case only to medical bills. You must include all your debts in your bankruptcy filing. So, if your only debt is medical bills, you may have to consider other options. Other options for dealing with medical debt include;
- Negotiating with the medical provider
- Entering a debt management plan
- Consolidating your debt
- Raising money
Contact Us for Legal Help
If you are struggling with overwhelming medical debt, our Deerfield Beach bankruptcy lawyer at the Law Office of Adam I. Skolnik, P.A., is here to help. We can assess your situation and advise you accordingly. If you are eligible for bankruptcy, we can help you determine the right option and guide you through the process. Contact us today to schedule a consultation.
Source:
cnbc.com/2019/11/10/americans-are-drowning-in-medical-debt-what-to-know-if-you-need-help.html
