December 8, 2023

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Can Medical Debt Be Discharged In Bankruptcy?

Medical debt is an issue faced by millions of Americans every year. In fact, medical debt is the leading cause of bankruptcy in the United States. Between 2013 and 2016, approximately 530,000 families filed for bankruptcy each year due to medical issues. The stress that comes with medical debt can cause a lot of anxiety, sleepless nights, and even lead to depression. Individuals facing medical debt may consider filing for bankruptcy, but the question remains: Can medical debt be discharged in bankruptcy?

Types of Bankruptcy

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There are two types of bankruptcy that individuals can file: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is known as a “liquidation” bankruptcy. This means that a debtor’s non-exempt assets are sold, and the proceeds are used to pay off creditors. Chapter 13 bankruptcy is known as a “wage earner’s” bankruptcy, which requires a debtor to pay back a portion of their debt over a period of three to five years.

Can Medical Debt Be Discharged in Chapter 7 Bankruptcy?

Medical debt can be discharged in Chapter 7 bankruptcy. However, it is important to understand the rules regarding the discharge of medical debt. Medical debt, just like any other unsecured debt, can be discharged in Chapter 7 bankruptcy. Unsecured debt is a debt that is not attached to collateral, such as a car loan or mortgage. Medical debt is an unsecured debt and is treated as such in bankruptcy proceedings.

To discharge medical debt in Chapter 7 bankruptcy, a debtor must:

1. Show that they do not have enough disposable income to pay their medical debt.

2. Meet the income requirements for filing under Chapter 7 bankruptcy.

3. Not have engaged in any fraudulent activity or committed any other disqualifying conduct.

If a debtor meets these requirements, then their medical debt can be discharged in Chapter 7 bankruptcy.

Can Medical Debt Be Discharged in Chapter 13 Bankruptcy?

Medical debt can also be discharged in Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, a debtor presents a repayment plan to the court that outlines how they will pay back their debts over a period of three to five years. Under the repayment plan, a debtor pays back a portion of their unsecured debts, including medical debt.

To discharge medical debt in Chapter 13 bankruptcy, a debtor must:

1. Show that they do not have enough disposable income to pay their medical debt.

2. Present a repayment plan that meets the requirements of Chapter 13 bankruptcy.

If a debtor meets these requirements, then their medical debt can be discharged in Chapter 13 bankruptcy.

Exceptions to Discharge

It is important to note that there are exceptions to the discharge of medical debt in bankruptcy. Some medical debts cannot be discharged, such as debts that were incurred due to fraud or intentional harm. Additionally, some medical debts may be considered priority debts, which means they are given higher priority in bankruptcy proceedings. Examples of priority medical debts include debts owed to medical providers for services rendered within the 180 days before filing for bankruptcy.

Frequently Asked Questions

Q: Can I file for bankruptcy just for medical debt?

A: Yes, you can file for bankruptcy solely to discharge your medical debt. However, it is important to consider all of your debts and financial situation before making a decision to file for bankruptcy.

Q: Will bankruptcy hurt my credit score?

A: Yes, filing for bankruptcy can negatively impact your credit score. However, the impact will vary depending on your individual circumstances.

Q: Will bankruptcy discharge all of my medical debt?

A: Bankruptcy will discharge all of your unsecured medical debt, unless there are exceptions to discharge.

Q: Do I need a lawyer to file for bankruptcy?

A: No, you are not required to hire a lawyer to file for bankruptcy. However, it is recommended to seek advice from a bankruptcy attorney to ensure that your rights are protected and that you are making an informed decision.

Q: Can I file for bankruptcy if I have already paid some of my medical debt?

A: Yes, you can still file for bankruptcy if you have paid some of your medical debt. The bankruptcy court will take into account all of your debts and assets, regardless of previous payments.

Conclusion

Medical debt is a significant issue faced by many Americans. Filing for bankruptcy may be an option for those facing overwhelming medical debt. Medical debt can be discharged in both Chapter 7 and Chapter 13 bankruptcy, as long as the debtor meets certain requirements and exceptions to discharge do not apply. It is important to consider the impact of bankruptcy on your credit score and to seek advice from a bankruptcy attorney before making a decision to file for bankruptcy.

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Article Summary:

Medical debt is the leading cause of bankruptcy in the United States with approximately 530,000 families annually filing due to medical issues. However, medical debts, just like any other unsecured debts can be discharged in a bankruptcy proceeding. An individual can either file for Chapter 7 bankruptcy, known as a ‘liquidation’ bankruptcy allowing a debtor to pay off a portion of their debts; or Chapter 13 bankruptcy, known as a ‘wage earner’s’ bankruptcy which requires a debtor to pay back a portion of their debt over a period of three to five years. To discharge medical debt in bankruptcy, debtors must meet certain requirements.

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