I have accrued over $25,000 in medical bills that I cannot pay, and that's not counting the $12,000 I've already put on credit cards. If I file for bankruptcy, can I have my medical bills discharged?
Medical debt is one of the most common reasons people seek bankruptcy relief. Read on to learn more about how you can wipe out medical bills through bankruptcy.
When you file for bankruptcy, your debts are separated into different categories. Certain debts receive special priority treatment and can’t be eliminated through bankruptcy. Fortunately, medical debt is not one of them.
In bankruptcy, medical bills are considered general unsecured debts just like your credit cards. This means that medical bills don’t receive priority treatment and can easily be wiped out by filing for bankruptcy.
To learn more about how different types of debt are treated in bankruptcy, see Secured, Unsecured, and Priority Claims in Bankruptcy.
Depending on the type of bankruptcy you qualify for (or is in your best interest), you may be able to eliminate your medical obligations by filing for either Chapter 7 (most common) or Chapter 13 bankruptcy (more complicated).
If you qualify for Chapter 7 bankruptcy, your discharge will wipe out your medical bills along with your other general unsecured debts. There is no limit to the amount of medical debt you can discharge in Chapter 7 bankruptcy. However, to qualify for a Chapter 7, your disposable income must be low enough to pass a means test.
For more information, see The Chapter 7 Bankruptcy Means Test.
Any medical bills you paid with your credit card will also be discharged (along with the rest of your credit card debt).
In Chapter 13 bankruptcy, medical bills are lumped in with your other general unsecured debts in your repayment plan. The amount you must pay general unsecured creditors depends on your income, expenses, and nonexempt assets.
Each creditor then receives a pro rata portion of the total amount going towards these debts in your plan. This is typically only pennies on the dollar. However, keep in mind that you may not be eligible for Chapter 13 bankruptcy if your medical bills and other debts exceed the allowed Chapter 13 debt limits.
To learn more about your options, consult with a bankruptcy attorney, or check out our sections on Chapter 7 and Chapter 13 Bankruptcy.