Hospital and medical bills are mostly not under our control. Along with the emotional and physiological stress that comes when you or your loved one is in the hospital, dealing with the added pressure of overwhelming medical fees is not easy. This will why people often seek bankruptcy relief after an outstanding medical debt that might have spiraled out of control. However, what happens then? Like we all know, life must go on. Can you file for bankruptcy and get out of paying your medical bills?
Medical debt and bankruptcy
To file for bankruptcy, debts need to be separated into two categories. These include the priority and nonpriority unsecured debt. When you file for bankruptcy, debts like domestic support obligations and overdue taxes do not get eliminated. In fact, they receive special priority treatment. This means that whenever you are in a position to pay the debt, these will have to paid off first. Medical bills, however, fall under the category of unsecured debts. Like credit cards, they do not receive any special treatment. This quality results in them having the ability to be wiped out when you file for bankruptcy.
How does this happen?
Medical debt can be eliminated with Chapter 7, as well as Chapter 11 bankruptcy. To understand which bankruptcy you should file for, you will have to consider your personal situation and see if you meet the qualification requirements.
Chapter 7 bankruptcy
If you pass the qualification requirements for Chapter 7 bankruptcy, your medical bills will be wiped out along with other unsecured debts, including student loans. Fortunately, there is no maximum limit to the medical debts that you can discharge under Chapter 7 bankruptcy. Whatever bills that have been paid with your credit card will not be taken into account, along with the rest of your credit card bill. To qualify for Chapter 7 bankruptcy, you cannot have a high disposable income. Your income needs to be low enough to pass the Chapter 7 Bankruptcy Means Test. This calculates your current income to see if you can pay back a portion of your debt. This test is used to disqualify those with high incomes. If you do not pass the means test, you cannot qualify for the Chapter 7 discharge. However, you may file under the Chapter 13 bankruptcy relief.
Chapter 13 bankruptcy
In Chapter 13 Bankruptcy, bills are included in your repayment plan, alongside other unsecured debt. Unsecured creditors will have to be paid based on your personal income, expenses, and nonexempt assets. Each creditor is given a pro-rata portion to make them aware of the amount of money going towards these debts. However, there might be chances that you are not eligible for Chapter 13 bankruptcy. You will be required to make enough income to pay all your bills in full as part of your repayment plan. This also includes priority creditors who need to be paid back as soon as possible. Moreover, medical bills and additional debts must fall under the Chapter 13 debt limits. For more information, speak with an experienced bankruptcy attorney – schedule your free consultation today.