Chapter 7 and Medical Bills
For middle class Americans, even those with health insurance, falling prey to financial catastrophe when sick is not uncommon. In 2007, three-quarters of Americans who filed for bankruptcy did so in the aftermath of illness, and the majority of those were insured.
An illness or injury can mean not only medical bills, but missed work or even job loss, plus bills for physical therapists, prescriptions and other health care providers. Many times, these additional unexpected expenses are paid for on credit cards, creating an uncontrollable debt cycle.
If you're struggling with medical bills or unable to work due to a medical emergency, you may be able to find a fresh start through personal bankruptcy. Could bankruptcy be right for you? Simply fill out the case review form below to arrange a free, no-obligation consultation with an attorney near you today.
Medical Debt in Chapter 7 Bankruptcy
In bankruptcy proceedings, medical bills are considered a type of unsecured debt. Unsecured debts are those that are not backed by a physical item. If you are unable to pay make payments on unsecured debts, creditors can't repossess any items, but they can sue or garnish wages.
Chapter 7 bankruptcy is a form of personal bankruptcy designed to wipe out unsecured debts. Chapter 7 is especially suited for those who have experienced a long-term drop in income, or whose regular income is not much.
Chapter 7 cases move fairly quickly - the average case is over in as little as four months from the time of filing to the discharge.
At the end of a successful Chapter 7 case, all eligible debts, such as medical bills and credit cards, included in the filing should be discharged, ending any legal obligation to pay them.
Qualification for Filing Chapter 7 on Medical Bills
Before you file Chapter 7 bankruptcy on your medical bills, it's required that you confirm your eligibility. Bankruptcy laws were reformed by the federal government in 2005 and a means test was implemented to determine which applicants qualify for protection under Chapter 7 bankruptcy.
The means test compares your income to the median income in your state based on your household size. Many people with medical bills have also missed work or had to take significant time off. These reductions in pay may make it easier to qualify for Chapter 7.
If your income is above the median, the courts will assess your disposal income and determine if you have enough income each month to make reasonable payments to all of your creditors. You may still qualify for Chapter 7 under this test, or the court may recommend a Chapter 13 repayment plan.
While filing bankruptcy, all of the details concerning your financial life must be included. For medical bankruptcy, all aspects related to your medical bills, including outstanding payments and payments already made to medical institutions, must be included. Under Chapter 7 bankruptcy, all assets above the non-exempt threshold may be also sold to repay the creditors.
To learn if you may qualify for Chapter 7's debt discharge, connect with a local bankruptcy lawyer today. Simply fill out the form on this page to get started.