Are Medical Bills Dischargeable in Bankruptcy?
One of the top reasons for filing bankruptcy is excessive medical bills, according to experts. Even people with health insurance may have tens of thousands of dollars in medical bills after an emergency, including high deductibles and co-pays. Therefore, discharging medical debt may be an important priority for many people who file.
Classification of Debt
Whether you choose to file a Chapter 7 or a Chapter 13 bankruptcy, your debt will be categorized according to type. Essentially, there are three types of debt: secured, unsecured and priority claims. Secured debt is secured by a tangible asset, such as a home or car. Unsecured debt is simply “good faith” debt and is not secured by any collateral, such as credit card debt. Priority debt is a special classification of debts that cannot normally be discharged by bankruptcy, such as taxes and child support. Medical debt is classified as unsecured. Therefore, it is usually a simple matter to discharge these debts through bankruptcy. Depending on the type of bankruptcy you file, you may be required to pay a portion of the debt, or you may be able to discharge all of it.
How Can I Discharge My Medical Debt?
If you qualify to file a Chapter 7 bankruptcy because you passed the Means Test, your medical debt will simply be discharged along with the rest of your unsecured debt. However, if you do not qualify for Chapter 7, you may still be able to discharge most of your debt by filing a Chapter 13 bankruptcy petition. Chapter 13 allows you to discharge your debt after you have paid back a certain portion under an agreement with the bankruptcy court. Your medical creditors will receive some money, although typically the amount is very small compared to the overall debt. If you exceed Chapter 13 debt limit restrictions, you may need help determining the best way to discharge your debt. An experienced bankruptcy attorney like those at the Oswalt Law Group in Phoenix may be able to help you find a way to remove the burden of medical debt and enjoy the freedom that comes with discharging these obligations. Your bankruptcy attorney will help you assess your debts and determine the best chapter under which you should file for relief. With the help of an Oswalt Law Group bankruptcy attorney, you may be able to find relief from crushing medical debt and receive a fresh financial start through the power of bankruptcy. Call today to learn more.