Can You File Bankruptcy on Medical Bills?

A Closer Look at Medical Debt & Bankruptcy Laws

Medical emergencies can strike without warning, leading to hefty medical bills that can pile up, leaving individuals and families in a financial pinch. If you find yourself buried under a mountain of medical debt, you might be asking, “Can you file bankruptcy on medical bills?” According to experienced bankruptcy lawyers, the answer is yes.

Bankruptcy law is designed to assist individuals in regaining control of their financial situation, and this includes helping manage overwhelming medical debt. Whether you should file for bankruptcy due to medical bills and how to navigate the process is where the advice of a seasoned Honolulu bankruptcy lawyer becomes invaluable.

Choosing The Best Type Of Bankruptcy For Medical Debt

Choosing the right type of bankruptcy to address medical debt can be crucial. Unlike a specific process that targets only one type of debt for discharge, bankruptcy provides the opportunity to relieve multiple debts, including medical expenses, depending on the bankruptcy type chosen and the nature of the debts involved.

Bankruptcy proceedings classify debts into two main categories: “secured” and “unsecured,” further dividing them into “priority” and “nonpriority” debts. Secured debts are supported by collateral, such as a car or a home, while unsecured debts lack such backing. Among the unsecured debts, certain obligations like tax bills, student loans, child support, and alimony are given special treatment and labeled as priority debts. Medical bills are typically considered nonpriority unsecured debts and are among the debts most likely to be discharged or eliminated in bankruptcy. 

There are primarily two types of personal bankruptcy: Chapter 7 and Chapter 13. A Honolulu bankruptcy attorney can help determine which type is most suitable for your situation. The type of bankruptcy filed will directly influence how your medical debt is treated.

Filing For Chapter 7 Bankruptcy On Medical Debt

Chapter 7 bankruptcy provides complete relief from medical debt. There are no limitations on the amount of debt that can be discharged, including medical expenses charged to credit cards. Additionally, there is no requirement to repay any of these debts through a repayment plan.

To qualify for Chapter 7, you must pass the Chapter 7 Means Test. This test compares your income to the average income in your state, deducting necessary expenses. If your monthly income is below the state’s median income or if you don’t have enough disposable income to cover certain expenses, you can file for Chapter 7.

Filing For Chapter 13 Bankruptcy On Medical Debt

Chapter 13 bankruptcy involves a different approach to medical debt. While it still provides a form of debt relief, you are required to repay a portion of your overall debt. This involves creating a repayment plan based on your income, expenses, assets, equity, and other financial obligations. If you’re unable to meet your monthly bills and make payments to your creditors, you may not qualify for Chapter 13.

Unlike Chapter 7, Chapter 13 has debt limits. These limits change periodically, with the current limit set at $419,275 for all unsecured debts, including medical debt. If your total debt is below this threshold, you can file for Chapter 13 and have a significant portion of your medical debt discharged while repaying only a fraction of it.

For instance, depending on the amount of your debt, you might have 70% of the debt dismissed while being required to repay the remaining 30%. The specific percentages vary based on your debt amount, income level, and the bankruptcy courts in your state.

Considering The Implications Of Bankruptcy

Filing for bankruptcy is a significant decision and should not be taken lightly. Although it can provide relief from crippling medical debt, a Honolulu bankruptcy lawyer will explain that it also has potential drawbacks.

Bankruptcy can significantly impact your credit score and remain on your credit report for seven to ten years, depending on the type of bankruptcy filed. This could make future borrowing more challenging. Furthermore, not all assets are protected in bankruptcy, which means you may need to liquidate certain properties to satisfy your debt obligations.

Despite the downsides, bankruptcy can be a lifeline for those drowning in medical debt. Many people fear that they’ll lose everything if they declare bankruptcy. However, a Honolulu bankruptcy lawyer can help you understand this isn’t the case.

Bankruptcy law provides for numerous exemptions – assets, and property you are allowed to keep. These exemptions can include your home, personal belongings, and even retirement accounts, up to certain amounts. These provisions are designed to prevent you from becoming destitute and to help you get back on your feet.

Reach Out to Blake Goodman P.C. Today

When medical debt becomes overwhelming, know that there are options. At Blake Goodman P.C., we understand the emotional toll of financial stress and are committed to helping you navigate this complex process. Our team of experienced bankruptcy lawyers can guide you through the ins and outs of filing for bankruptcy due to medical bills, and help you take back control of your financial life.

Don’t face this challenge alone. Contact us today and let us help you explore your options and find a path toward financial stability.

This article is courtesy of My AZ Lawyers, a premier bankruptcy firm based in Arizona. Specializing in various bankruptcy matters, the firm is dedicated to guiding individuals through financial complexities, including medical debt-related bankruptcy, with personalized legal advice.