Medical debt is a common reason people find themselves in severe financial turmoil. Overwhelming medical bills can pile up due to longer-term treatments and sudden illness or injury. Some people falsely believe that medical debt can’t be eliminated through bankruptcy, but bankruptcy relief can wipe out your medical bills.
As you decide whether to pursue bankruptcy, you should know all the facts as well as the advantages. Learn how filing for bankruptcy could help your financial situation.
Medical debt is unsecured debt
Filing for bankruptcy involves a process that separates your debt into several different categories. Certain kinds of debt, unfortunately, cannot be wiped out through bankruptcy, but medical debt is not in this category. Medical bills are seen as general unsecured debts. This means the bankruptcy process lumps medical debt into the same category as credit card debt.
Using chapter 7 bankruptcy
There are different types of bankruptcy that are best for different situations. Depending on what form of bankruptcy you are eligible for or is best for you, there are different ways that medical debt is discharged. Chapter 7 bankruptcy is the simplest and most common way to eliminate medical debt through bankruptcy. Through chapter 7 bankruptcy, your medical bills are wiped out with your other unsecured debts with no limit. This includes bills paid using your credit card. You must pass a chapter 7 bankruptcy means test that proves your disposable income is low enough to qualify.
Using chapter 13 bankruptcy
Chapter 13 bankruptcy also lumps your medical bills with other unsecured debt, but it works slightly differently. This type of bankruptcy is designed to restructure your debt instead of liquidating it. This means your unsecured debt is eventually paid off through a manageable repayment plan. The amount needed to pay creditors differs depending on various factors, including expenses, income and nonexempt assets. The repayment period typically lasts three to five years. You may not qualify for chapter 13 bankruptcy if your debts exceed certain limits.
Living with the burden of medical debt can be financially devastating. Whether you have a fixed income or a certain amount of disposable income, it is possible to get relief from crushing medical debt. As you consider bankruptcy, you may want to hire a professional bankruptcy lawyerto assist you. Legal guidance can help you navigate through the confusing and complicated process of filing for bankruptcy, and a bankruptcy lawyer can also act as a negotiator between you and your creditors.