Friday, May 29, 2015

Can I Eliminate Medical Bills in Bankruptcy?

Medical debt is considered general unsecured debt and is dischargeable in a Chapter 7 or Chapter 13 bankruptcy. How you discharge or eliminate that debt is determined by what type of bankruptcy you file.

Chapter 7 

As long as you are eligible for Chapter 7, the discharge will eliminate your personal liability for your medical bills, regardless of the amount owed. In other words, there is no limit to how much medical debt you can get rid of by filing Chapter 7.

Chapter 13

Chapter 13 bankruptcy will also eliminate your personal liability for your medical bills; however, there are debt limits in Chapter 13.  Currently, the unsecured debt limit in Chapter 13 is $383,175.00. If you exceed the unsecured debt limit, you are not eligible for Chapter 13.

In Chapter 13, medical bills are put into a creditor class referred to as general unsecured debt, which would also include such debts as credit cards and unsecured loans.  These types of debts are generally paid back at a fraction or percentage of what is owed. The unpaid fraction or percentage is eliminated or discharged upon plan completion and entry of a discharge order. The amount that much be repaid to general unsecured creditors depends on several factors, such as your income, budget and unexempt equity in personal or real property that you own.

The Bottom Line

Medical debt can be eliminated or discharged by filing bankruptcy. If you are struggling with medical debt or other debts, consult with a bankruptcy attorney to determine what type of bankruptcy makes sense for you and how your debts would be treated. I, like most bankruptcy attorneys, offer free consultations. So, take advantage and make sure you avoid garnishment and other nasty collection actions.

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