Does Chapter 7 Bankruptcy Eliminate Medical Bills?

If you are facing significant debt as a result of catastrophic medical bills, there’s a good chance that you’re feeling a combination of despair, frustration, guilt, and a sense of failure. You may be wondering whether bankruptcy would help and whether it would even touch your medical bills. There’s good news on two fronts: first, filing for bankruptcy will absolutely eliminate your medical debt, and second, that you’re far from alone. In fact, according to a recent study, more than two-thirds of all bankruptcies were a direct result of medical issues.

Medical issues can lead to debt in two ways. The first is the most obvious – the medical expenses themselves. High hospital fees combine with inadequate healthcare insurance to create insurmountable debt. The second is less obvious but still a profound factor – people who are disabled due to medical issues are unable to work and generate the income that they need to pay their bills.

Some providers will waive outstanding balances based on your income or other obligations, but if you have accrued medical debt in addition to other types of debt, bankruptcy may be your best answer.

Medical debt falls into the same category as credit card debt. It is considered unsecured, meaning that there is no property that has been pledged in exchange for the debt and therefore nothing that can be seized. These types of debt are most easily discharged. By contrast, priority debts like student loans, child support, taxes, and court-ordered fines will not be discharged in a bankruptcy filing.

As far as the filing itself goes, the biggest question that will need to be answered is whether you are pursuing/eligible for a Chapter 7 bankruptcy, which eliminates all dischargeable debt with no need to repay. To qualify for Chapter 7 you need to prove that your income less the cost of your necessary expenses is lower than your state’s median income. If your income disqualifies you for Chapter 7 bankruptcy, you can still take advantage of Chapter 13 bankruptcy, which doesn’t eliminate all of your debt but gives you more time and better terms for paying outstanding balances.

Whatever type of bankruptcy you apply for, all of your debts will be evaluated to determine what category they fall under and which can be discharged. To get a sense of exactly how a bankruptcy filing will or will not alleviate your situation, contact our bankruptcy attorneys today to set up a time to chat.