Expensive medical bills can quickly grow out of control. Coupled with a lost income from missed work, and you could suddenly go from financially stable to dangerously in debt.
And while you're free to explore other medical bill assistance options, we want to provide some specific details about how filing bankruptcy may get rid of your medical bills and eliminate other types of debt you may have.
All debt stemming from unpaid medical bills is classified as "unsecured debt." This means that it is not tied to a particular piece of property. Other types of unsecured debt include:
Examples of secured debt would include your home mortgage and any car loans.
The debt classification of your medical bills is important because it relates to how bankruptcy courts will deal with them. When you file bankruptcy because of medical bills, you may also include other debts you have incurred. So while a serious and unexpected illness, and the medical bills that followed, may been the main cause of your financial pressure, you may also take this time to address debt in other areas of your life.
There are two main types of personal bankruptcy: Chapter 7 and Chapter 13. Let's take a look at how each can help you get control of your medical debt.
Chapter 7 bankruptcy is designed to help people with severe unsecured debt, and it takes care of this debt with swift force. When you file Chapter 7 bankruptcy, all of your unsecured debts, such as medical bills and credit card bills, could be completely eliminated almost instantly.
In addition to wiping out your medical debt, Chapter 7 may also stop and prevent wage garnishment, home foreclosure and vehicle repossession.
In order to file for Chapter 7 bankruptcy, you must pass the bankruptcy means test. The means test weighs your debts against your assets and income to determine your ability to pay off your debts. Chapter 7 bankruptcy is typically recommended for people that have less income and fewer assets.
If your job changed because of your illness or injury, then you may qualify for a Chapter 7 discharge. For example, if your injury left you disabled or forced you to take a lower-wage but less strenuous job, then you may meet the income requirements for filing. Or, if you had to leave a job because of illness and have been unable to find work again, you also could qualify.
Chapter 7 also can protect some of your property, even your home and car, from foreclosure and repossession. Each state has a detailed list of Chapter 7 exemptions. These exemptions outline the types and amounts of your property that are protected from a forced sale to pay off your debt. Exemptions vary by state, so consult a local bankruptcy lawyer to see how the laws might affect you.
Chapter 13 bankruptcy may also help you get control of your medical debt, and may be a better option for you if:
In a Chapter 13 bankruptcy case, your medical debt would be combined, and possibly reduced, along with all of your other debts. They would then be ordered and secured in what is called a bankruptcy trust.
Working with your bankruptcy lawyer, you and the courts would agree upon a repayment timetable during which you would make one monthly payment to a bankruptcy trustee.
This trustee would handle all of your debts and creditors. The repayment plan typically takes 3-5 years, and during this time you will be fully protected from foreclosure, wage garnishment, repossession, lawsuits and creditor harassment thanks to the automatic stay provision.
Then, at the end of this period, all of your debt will have been dealt with. Creditors will not be able to make a claim or try to collect on any of these debts.
You may be able to emerge from your Chapter 13 bankruptcy free of medical debt, and ready for a fresh financial start.
If you're burdened by medical debt, start down the road to recovery today. Whether you need help getting your medical debt under control or have other debt issues caused by expensive medical bills, speak with a local bankruptcy lawyer today about your options.
Bankruptcy was designed to help people by providing protection and relief. If you need these, let a medical bankruptcy lawyer outline how bankruptcy can affect you and help you get rid of your debt.
To speak with a medical bankruptcy lawyer near you, simply complete the free case evaluation form on this page and we'll connect you right away.