Unfortunately, the harsh reality is that a single major accident or severe illness can put most Americans in overwhelming debt. With soaring healthcare costs in the United States, hospital stays and ongoing medical treatments can quickly deplete your hard-earned savings. On top of that, there are regular household bills, insurance premiums and other costs to manage.
Crippling medical bills plus ongoing expenses can make the thought of repayment seem impossible. But bankruptcy, a legal process for debt relief, may offer you a beacon of hope.
Can bankruptcy discharge medical debts?
Declaring Chapter 7 or Chapter 13 bankruptcy can release discharge borrowers from certain debts, commonly known as nonpriority unsecured debts. Once your debt is discharged, you will no longer have to pay it and creditors cannot take further collection actions, such as telephone calls, letters or lawsuits.
Medical debt falls under unsecured nonpriority debt, which you can discharge through bankruptcy, along with credit card debt and personal loans. Depending on the type of bankruptcy you qualify for, you could completely eliminate or substantially reduce your medical bills.
How to know if you qualify for bankruptcy
Chapter 7 bankruptcy will likely discharge all medical debt. A bankruptcy trustee will take the debtor’s eligible assets for liquidation to pay off creditors. It is reserved for those who lack regular or enough income to repay creditors and is typically a last resort.
To qualify for Chapter 7, you must pass the means test, which compares your income to the state’s median income and considers your necessary expenses. If you have disposable income or earn enough to repay your debts gradually, you must file Chapter 13.
Chapter 13 allows debtors to discharge most of their medical debt and pay only a portion of what they owe through a repayment plan. All employed individuals with a total debt of less than $2,750,000 can qualify for Chapter 13.
Bankruptcy can liberate you from crippling debt, allowing you to start over financially. This legal measure can ease the stress that may be hindering your full recovery. With the support of an experienced bankruptcy attorney, you can gain a clearer understanding of how to take advantage of bankruptcy and gain valuable advice on protecting your assets.