When you or your loved one need medical treatment, bills may be your last concern, which is understandable. Can you declare bankruptcy on medical bills?
Medical bills can cause their kind of injury, specifically aimed at your financial well-being. If you are overwhelmed with medical bills and do not know how to pay them, you may wonder if you can declare bankruptcy on medical bills. Technically, it is, but not a standalone option. There is no such thing as a medical bankruptcy. However, medical debt is dischargeable through regular bankruptcy proceedings.
Medical Debt: Is it Dischargeable in Bankruptcy?
A bankruptcy case cannot be limited to medical bills. However, you can get relief from your medical debt through bankruptcy. In a default, medical debt is considered non-priority unsecured debt. Meaning it can be forgiven and is dischargeable.
If you are considering bankruptcy to aid you in dealing with overwhelming debt (including medical bills), know that this is a significant move that will have lasting impressions on your credit for years. Bankruptcy is complicated. Thus, it helps to learn about the bankruptcy process before you begin.
There are two main kinds of personal bankruptcy: Chapter 7 and Chapter 13. Both address the underlying excess debt problem, but the two processes differ. Below is a quick rundown of each.
Chapter 7 Bankruptcy and the Medical Debt
Chapter 7 bankruptcy is designed to help individuals who cannot afford to repay their debts. The court will consider your income, what you owe, and any assets that can be sold to defray your debt. Chapter 7 lets out your medical debt in a matter of months, but it is only an option for some. A few specifics:
- Chapter 7 is means-based;
- Some of your property may be liquidated;
- The process takes four to six months; and
- A Chapter 7 bankruptcy lingers on your credit report for ten years.
Chapter 13 Bankruptcy and the Medical Debt
Chapter 13 bankruptcy centers on making debt repayment more manageable. After considering all your income, assets, and debt, a Chapter 13 bankruptcy creates a court-mandated plan that aids you in repaying all or some of your debt (including medical bills) in affordable monthly installments that do not surpass 15% of your disposable income. Other details:
- Chapter 13 creates a three- to a 5-year repayment plan;
- Debt cannot exceed certain levels;
- You must have a regular income;
- Chapter 13 may be better for homeowners; and
- Resolution takes longer.
Alternative Options: Getting Rid of Medical Debt
You may have bankruptcy alternatives worth exploring. Before throwing in that towel on your medical debt, consider the following steps to pay it off or reduce it:
1. Audit your bills. Check for unauthorized charges or billing errors. Ensure that your insurance has paid for covered expenses.
2. Negotiate your costs. Hospitals and medical providers can discount your expenses, especially if you don’t have insurance.
3. Look for financial assistance options. Many hospitals have other types of financial assistance or income-driven repayment plans. Local charities can help also.
4. Work out a payment plan with your provider. Many medical providers prefer to work out a no-interest or low-payment plan than send your bill to collections (or see it end up in bankruptcy).
5. Seek out low-interest loans or credit cards. Personal loans are available at interest rates lower than what you pay on regular credit cards. Also, medical credit cards often come with introductory 0% interest offers.
Recovering Your Financial Health
If you have considered all your options and bankruptcy is still the best remedy, getting aid is suitable. Since bankruptcy proceedings mostly require you to meet with a court-approved credit specialist as part of the process, this is vital to help you understand whether bankruptcy is necessary and to aid you in deciding how to proceed. When you are ready to move forward, a bankruptcy attorney can assist you in navigating your way through. Get a free consultation at the Law Offices of Ronald E. Stadtmueller today! Trust our Bankruptcy Law Specialist in San Diego for you to reap the benefits of filing for bankruptcy in seeking quick relief. We legally resolve your overwhelming debts and help you wipe out your medical bills!
Medical expenses can indeed set you back financially. When this happens, bankruptcy may help you return to the right path. It is a challenging process with important long-term consequences, but it could offer you the freedom to recover your financial health, reset your finances, and rebuild your credit.