November 17, 2020
Can Bankruptcy Help with Medical Bills?
Even if you have good health insurance, a serious injury or illness can seriously hamper your ability to earn a living. It can also make paying medical debt more difficult. When medical debt becomes impossible to manage, filing for bankruptcy may be the only real option. Can bankruptcy really help with medical bills? The answer is yes. Here are some basics that you should know.
How the Court Classifies Medical Debt
Medical debt is typically classed as unsecured debt. That means that medical bills are looked at in much the same way as credit card debt. Unsecured debt can be managed through either Chapter 7 or Chapter 13 bankruptcy. You and your lawyer will work together to determine which approach would be in your best interests.
Using a Chapter 7 to Deal with Medical Bills
Assuming that the results of the means test determine you’re eligible for Chapter 7 and you have no other pressing debts that are considered priority and therefore cannot be included in this type of action, your lawyer is likely to recommend this solution.
The great thing about this approach is that the application of late fees and other charges to those medical debt accounts cease when you file the petition. Within three to five months, the bankruptcy discharge will come and those debts will no longer exist.
Would a Chapter 13 Work in Your Case?
In addition to medical debt, you’ve amassed some obligations that cannot be discharged as part of a Chapter 7 bankruptcy. Fortunately, you do have some disposable income that can go toward partially settling different forms of debt. In this scenario, your bankruptcy lawyer is likely to recommend filing a Chapter 13 petition.
The benefit of this approach is that those bills no longer accrue any additional late fees or interest on the balances. Your lawyer will file a repayment plan with the court. If it’s approved, you will make payments to the court for the next three to five years. Priority debts are settled in full first, then partial or full payments are spread around to unsecured creditors. If there is any remaining unsecured debt at the end of the Chapter 13 periods, the court will discharge it.
The bottom line is that you don’t have to deal with the stress of having medical debt and being unable to pay it off right this minute. Seeking bankruptcy protection will help you get through this difficult time and be able to concentrate on recovering or at least improving your health. Instead of dealing with one more collection call, schedule a consultation with a bankruptcy lawyer today. The solution may be easier than you anticipated.