According to a 2013 report by CNBC, medical debt is the number one reason why individuals and families need to file for bankruptcy in the United States. That year, “medical bankruptcy” affected about 2 million people, many of whom had health insurance when they suffered the illness or injury that caused their financial struggles.
While there is no official “medical bankruptcy,” it’s true that medical bills cause hundreds of thousands of people to eventually seek Chapter 7 or Chapter 13 bankruptcy protection. Outlined below is what happens to medical debt when filing for each type of bankruptcy.
Medical debt and Chapter 7 bankruptcy
If you qualify for Chapter 7 bankruptcy, the debt discharge you receive will eliminate your medical debts and other unsecured debts, including debts you incurred by paying for medical bills using a credit card. There are no limits under Chapter 7 rules to the amount of medical debt you can discharge. You simply must be able to pass the bankruptcy means test to qualify for Chapter 7.
Medical debt and Chapter 13 bankruptcy
In Chapter 13 bankruptcy, your medical bills are included with all the other unsecured debts in your repayment plan. The amount you have to pay to your creditors depends on factors such as your income, expenses and nonexempt assets.
Every creditor you pay in your Chapter 13 repayment plan receives a pro rata portion of the total amount of money put toward the debts in your plan. However, if your medical bills and other debts exceed the limits under Chapter 13, you may not be eligible to file for this form of bankruptcy protection.
For more information about how you can discharge your medical debts through bankruptcy, contact a skilled bankruptcy attorney with Jeff Field & Associates. Call us at 404-381-1278 or contact us online to schedule a free initial consultation.
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