Medical debt is a leading reason why thousands of Americans are forced to file for bankruptcy. Medical emergencies and illness cause financial hardship for many families. Medical debt encompasses a wide range of expenses from bills, hospital visits, collection activity, in addition to other associated medical costs and expenses.
If you are facing medical debt, it can be completely eliminated by filing for Chapter 7 bankruptcy as well as Chapter 13 bankruptcy. Medical bills can be completely gone forever by filing for either one of these bankruptcies. However, it is important to note the difference between the two.
Chapter 7 bankruptcy centers around helping those with debt who have little to no income to pay back to their creditors. If you file for Chapter 7 bankruptcy, medical debt is considered a nonpriority unsecured debt. Unsecured debt is any debt that is not secured by a piece of property. Unsecured debt is then divided into priority and nonpriority debt. Priority debts are typically unable to be discharged by filing for bankruptcy and are paid before other debts. Nonpriority debt is the last thing to get paid and is dischargeable. Secured debt is different from unsecured debt in that it is supported by some form of collateral or property in which a creditor can recover if you are unable to make a payment.
In a Chapter 7 bankruptcy, there is no limit on how much or little medical debt can be discharged. As long as you qualify for Chapter 7 bankruptcy by passing the means test, you will be able to completely eliminate any and all of your medical expenses.
In a Chapter 13 bankruptcy, medical debt is still considered unsecured debt. Some of this debt may be repaid over the course of your three to five year repayment plan. If you have a large amount of medical bills, the remainder that is not paid off will be discharged at the end of your bankruptcy case. Chapter 13 Bankruptcy is better suited for individuals who have a steady income and property that they may want to hang on to. The amount of unsecured debt that gets repaid depends on a variety of factors such as your income and how much would have been paid off had you filed for Chapter 7 bankruptcy.