Discharging medical bills in bankruptcy

On Behalf of | Sep 1, 2023 | Bankruptcy

When a person is sick and needs treatment, they are often focused on feeling better without thinking about the cost. Unfortunately, medical care can be very expensive and they may not be able to pay their medical bills, even with insurance. They may choose to file for bankruptcy, which can offer them a fresh start.

Types of bankruptcy

There are two forms of personal bankruptcy. Chapter 7 bankruptcy is known as a liquidation bankruptcy, which involves selling assets to pay outstanding debt. Medical bills are generally considered unsecured debt and may be dischargeable in Chapter 7.

In a Chapter 7 bankruptcy, the borrower may be able to keep certain assets like their home and personal items.

A Chapter 13 bankruptcy involves making a repayment plan over three to five years. Their medical bills become part of the payment plan. This type of bankruptcy may be useful for people with a regular income.

Effect on borrower

While filing for bankruptcy can negatively affect a borrower’s credit score, it does offer the opportunity for them to rebuild their finances and alleviate the stress caused by debt.

Once the borrower files for bankruptcy, there is an automatic stay applied. This means that most collection efforts against them will stop.

Although some borrowers try to negotiate with medical providers for a reduced payment or try to consolidate medical bills with lower interest rates, this may not be enough to resolve the debt.

There is help available for those who need assistance filing for bankruptcy.

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