Healthcare costs keep rising, and with one trip to the doctors, it can be easy to head into a spiral of overwhelming debt.
Maybe you had a sudden sickness come on unexpectedly, or you have a more serious illness that requires frequent attention and monthly medication.
These medical bills can easily start to pile up, creating massive amounts of debt.
How do you get out from under it? Can you file bankruptcy for medical bills? We’re here to answer the most important questions when it comes to bankruptcy and medical debt.
Yes, you can file bankruptcy and in doing so, have your medical bills reduced or dismissed.
However, the bankruptcy process is all-inclusive—you must file bankruptcy on all your bills at the same time, which will include your medical bills.
There is no such thing as a “medical bankruptcy” whereby you declare bankruptcy solely on your medical bills.
The type of bankruptcy you select will dictate whether your medical bills are discharged or possibly reduced.
You have the option to choose either Chapter 7 bankruptcy or Chapter 13 bankruptcy (link to previous blog posts), each having its own pros and cons:
In Chapter 7 bankruptcy, depending on the debts you have, your medical debt will be considered unsecured and non-priority.
This means your debts will be discharged, and you will not be responsible for repaying them.
When you file for Chapter 13 bankruptcy, you will have a repayment plan for your debt lasting between 3-5 years, but because medical bills are considered unsecured, most people don’t end up repaying the full amount.
Now that you know the types of bankruptcy you can file on medical bills, you may have decided which one you want to file, but are you eligible?
Eligibility for bankruptcy relies on three factors: total debt, disposable income, and assets.
Chapter 7 bankruptcy does not have a limit on the amount of medical debt you can discharge, but there is a means test you must pass. The means test calculates whether your income versus your monthly bills is low enough to be qualified. The government created these qualifications to ensure it wouldn’t be abused by those in higher income brackets.
Chapter 13 bankruptcy requires that you are employed, up to date on taxes, and within their debt limitations. Depending on the amount of medical debt you have will determine which bankruptcy to file for. The courts will issue you a repayment plan, which you will be responsible for paying back.
You need to file bankruptcy for your medical bills, but will your doctor still see you?
Fortunately, Congress passed the Emergency Medical Treatment and Active Labor Act. It prevents hospitals from having the ability to refuse medical care to patients who can’t pay.
In other cases, regarding medical providers, i.e., your primary physician or physical therapist, do have the discretion to refuse medical treatment.
Many providers won’t go to these extreme measures and are happy to keep seeing you if you’re willing to pay moving forward, but it is something to keep in mind.
Now that you know some of the most important information when it comes to filing bankruptcy due to medical debt, should you take the leap?
Bankruptcy can help you get a fresh start at life without the stress of debt, but make sure it’s the right decision for you.
Ask yourself: will the hit to your credit be worth it at this moment? Any bills or debt accrued after you file will not be eligible for discharge.
Credit can always be built back up in time with the right tools.
You’ll also want to consider the fact you won’t be able to file for Chapter 7 bankruptcy for at least 8 years and stays on your record for 10 years.
Claiming bankruptcy doesn’t just end after filing. It is important you follow the right steps to get back on your feet again.
At Parker & DuFresne, PA. We understand the struggle of medical bills and debt. Bankruptcy can help you get back up on your feet.
With our help, we’ll be with you every step of the way.
We’ll discuss which bankruptcy to file for is best under your circumstances. In addition, we offer a complimentary credit rebuilding program to each of our clients.
Contact us today for a free consultation to get the relief you’ve been hoping for.
Parker and DuFresne