Does bankruptcy clear medical bills? Here is everything you need to know about eliminating healthcare debt through bankruptcy.
When a medical crisis strikes, it can be an overwhelming time.
There are so many areas of concern, and the financial liabilities stemming from these incidents can be some of the most anxiety-inducing.
With this, it can be easy to fall behind on bills and watch medical debt quickly stack up.
In these scenarios, there are a variety of options to settle these debts and move forward. You may be wondering—does bankruptcy clear medical bills?
The short answer is: it depends. There are various types of bankruptcy filings, and not all are created equal.
It’s important to understand the different types of bankruptcy filings, and how they may affect your debts and liabilities. For this—it may be best to contact a professional in the field to help navigate these confusing areas of law.
For more information on medical debt and the potential to eliminate it with a bankruptcy filing, keep reading below.
Different Types of Bankruptcy
Filing for bankruptcy is a legal proceeding, in which you stand before a court of law and admit you cannot repay your outstanding debts. This may be carried out by an individual, or a business.
There are multiple types of bankruptcy filings, that carry drastic differences in their resulting actions. Depending on the situation, the judge will either erase your debts or come up with a repayment plan.
It’s imperative that you carefully review each type, and how it may apply to your situation.
The main types of bankruptcies are defined by the chapter of the US Bankruptcy Code in which the law is codified. They are:
- Chapter 7 – liquidation
- Chapter 9 – municipalities
- Chapter 11 – large reorganization
- Chapter 12 – family farmers
- Chapter 13 – repayment plan
- Chapter 15 – foreign cases
Most everyday citizens will not experience a majority of these situations. More often than not, individuals tend to file for bankruptcy under Chapter 7 or Chapter 13 filings.
Under Chapter 7 bankruptcy, the court appoints a trustee to oversee the administration of your bankruptcy case. This trustee will supervise the liquidation of your assets, which is used to repay outstanding creditors.
Individuals are only eligible for Chapter 7 bankruptcy if the court determines they do not bring in enough income to substantiate repayment of debts.
On the other hand, Chapter 13 bankruptcy functions differently than the forgiveness-heavy practices of Chapter 7. Chapter 13 bankruptcy instead reorganizes your debts, with a court-approved monthly repayment plan established.
This guarantees you will repay debts over a three to five year time period. The specific monthly payment will vary, depending on your income and overall debt levels.
While it still requires you to pay back what you owe, Chapter 13 does protect many assets from sale that would otherwise be liquidated under Chapter 7.
Does Bankruptcy Clear Medical Bills?
Now that we have established an overview of each type of bankruptcy filing, we can dive deeper into how medical bills come into play.
Generally speaking, individuals can eliminate or reorganize medical debts with most Chapter 7 or Chapter 13 bankruptcy filings.
In the eyes of the law, medical bills tend to be low-priority unsecured debts. This means that the court tends to be more focused on other types of debts, like mortgages or child support costs.
In most cases, Chapter 7 bankruptcy can eliminate all medical and credit card debt. But as previously noted, there are income restrictions that narrow the pool on who may be eligible for this option.
For those who do not qualify for Chapter 7, Chapter 13 bankruptcy may be another way to successfully reduce medical debt. Typically, Chapter 13 will eliminate some of the medical debt altogether. From there, the remainder is put into a repayment plan with a greater time period to settle the remaining balance.
So for those with crushing medical debt that just seems to keep piling up, there are options to move ahead. Determining which path to take may be the difficult part. But good news—there are qualified professionals ready to help
The Benefits of Hiring a Bankruptcy Attorney
Like many other areas, bankruptcy law in the United States can quickly become confusing to the layperson. This is where a bankruptcy lawyer comes into play.
With their skills and experience, they can help determine your best path ahead. In some cases, this may include other financial arrangements that do not include a legal bankruptcy filing. In other situations, they can narrow down your bankruptcy choices so you can make the most of your filing.
Bankruptcy can be a good way to recover from the constraints of mounting debt, but it does have lasting implications to take into account. Your credit and personal financial history will take a fall, which can alter the circumstances of many other areas in your life.
Furthermore, it leaves behind a permanent mark on your record. While these are not reasons to go against this option, they are just a few examples of the unforeseen consequences of these types of actions.
For this reason, it is important to seek the advice of an expert in the field. Consider a bankruptcy attorney who is well-known and well-respected in your area. They should have years of experience in the field and be able to provide top-notch advice to make sense of the confusing world of bankruptcy.
Deciding to File for Bankruptcy Yourself
Now that you can answer “does bankruptcy clear medical bills?”—you can further analyze your own situation and determine the best path ahead for your case. For assistance in navigating these often confusing legal territories, consider hiring a trusted bankruptcy lawyer for yourself.
In the Omaha, Nebraska area, there are qualified bankruptcy attorneys standing by to help you determine your best path ahead. Call (402) 415-2525 today for more information, and to schedule your consultation!
