Can Filing Bankruptcy Wipe Out Medical Debt?

Declaring Bankruptcy on Medical Bills in Michigan

In 2009, the American Journal of Medicine released a study about the leading cause of personal bankruptcy filings in the U.S. Not surprisingly, 62% of the study's participants stated that their bankruptcy could be attributed to unmanageable medical debt.

That being said, it is important to understand that you are not alone if you are struggling to repay costly medical expenses. Whether you owe money to a hospital, doctor or medical care provider, the bankruptcy lawyer at Hensel Law Office, PLLC can help you find a debt relief solution that is right for you. There is no need to struggle with uncontrollable debt any longer when help is just a phone call away.

Is There a Medical Bankruptcy?

There is no such thing as a "medical bankruptcy," or a bankruptcy limited to just resolving medical debt. However, if you are filing for any bankruptcy, your medical debt is considered unsecured debt, just like debts incurred from credit cards or personal loans, and can therefor be discharged.

Will Chapter 7 bankruptcy eliminate my medical debt?

If you have acquired a significant amount of medical debt, it may be in your best interest to file for Chapter 7 bankruptcy—as this process would allow you to discharge most, if not all, of your unsecured debt over a short period of time. Once you have liquidated your non-exempt assets and used the proceeds to repay your creditors, the court will order a discharge of all remaining debts. This, in turn, would free you of the legal obligation to repay them.

Known as "fresh start" bankruptcy, Chapter 7 is often the most practical way to rid yourself of overwhelming medical debt once and for all. If you do not qualify for this chapter, however, you should not hesitate to consider the possibility of Chapter 13.

Is medical debt discharged in Chapter 13 bankruptcy?

While Chapter 13 bankruptcy will not eliminate your unsecured debt as quickly as Chapter 7, it is still a viable option for those who are unable to get out from under their medical debt. Rather than receiving a discharge of debt within 4 to 6 months of filing, as would be the case in Chapter 7, Chapter 13 would allow you to develop a repayment plan that could be executed over 3 to 5 years. As long as you follow the decided guidelines of your bankruptcy plan, you should be able to receive a discharge of all remaining debts once the process has been concluded.

Unlike Chapter 7, which requires debtors to pass a means test, Chapter 13 bankruptcy is available to all consumers who have run into financial trouble.

Should I delay bankruptcy if I will be incurring new debt?

Since you would only be able to discharge debts that have been included in your bankruptcy petition, it may be in your best interest to delay your filing if you know that you will be incurring new medical debt in the near future. This will help you to ensure that you are not saddled with additional debt after completing the bankruptcy process.

If you are unable to hold off any longer, for whatever reason, it is important to note that you have the option to file for bankruptcy a second time if necessary. Depending on the chapter that you file under, however, you may be required to wait anywhere from 2 to 8 years before you can file again. That being said, you should not hesitate to weigh your options before filing.

Review Your Options for Eliminating Your Medical Debt

Interested in eliminating your medical debt once and for all? Discuss your options with a Michigan attorney at Hensel Law Office, PLLC today. For this reason, you have nothing to lose by taking the first step today.