Can Bankruptcy Help with Medical Bills?
Healthcare is an ongoing wellspring of controversy in the media, and medical bills remain one of the greatest sources of debt for Americans across the United States. According to a December 2014 report released by the Consumer Financial Protection Bureau, a staggering 43 million Americans are burdened with medical debt, accounting for more than half of all collection tradelines on consumer credit reports: just over 52%. With so many Americans financially debilitated with so much medical debt, more and more people are turning to bankruptcy for relief. But how does bankruptcy help eliminate medical debt? Our Warrington bankruptcy lawyers explain how Chapter 7 or Chapter 13 could help you get your medical bills under control for a clean financial slate.
Understanding Dischargeable Debt vs. Non-Dischargeable Debt
There’s no denying that “bankruptcy” is a scary word for most people. In truth, the stereotypical images conjured up by the word — home foreclosure, repossession, permanent financial ruin — couldn’t be further from the reality. While bankruptcy has an intimidating reputation, ironically, it can actually help debtors avoid those very same issues. For example, one feature of bankruptcy called the automatic stay places an automatic freeze on collection actions, giving debtors time to work out an acceptable financial plan. While a bankruptcy case is ongoing, the automatic stay will continue to protect against creditors.
But the automatic stay isn’t the only beneficial aspect of filing for Chapter 7 or Chapter 13 bankruptcy. Needless to say, bankruptcy’s best-known feature is its ability to reduce or even eliminate debt.
Of course, debt isn’t a one-size-fits-all matter. There are many different types of debt: secured and unsecured, priority and non-priority, and dischargeable and non-dischargeable. Bankruptcy treats each type of debt differently.
For the time being, let’s take a closer look at the concept of dischargeable versus non-dischargeable debt. In simple terms, dischargeable debt is debt which can be discharged, or eliminated, once the bankruptcy case is discharged. In other words, once your case concludes successfully, you are no longer obligated to repay dischargeable debts.
Therefore, non-dischargeable debt means just the opposite: these are debts which debtors are generally held responsible for, even if he or she files for bankruptcy. With some rare exceptions under limited circumstances, non-dischargeable debts which debtors must pay typically include financial obligations arising from:
- Alimony Payments
- Child Support Payments
- Criminal Fines
- Tax Debts
Is Medical Debt Dischargeable?
As you may have noticed, medical bills are not on that list. That’s because medical bills are considered dischargeable, or erasable, in both Chapter 13 and Chapter 7 bankruptcy. For the millions of Americans who are saddled with overwhelming medical bills, this is excellent financial news. Through the power of bankruptcy, you could potentially get rid of bills stemming from surgical procedures, the purchase of medical equipment, medication costs, and other medical expenses.
Better still, medical debt is always categorized as dischargeable regardless of where the debtor lives. It doesn’t matter whether you are a resident of Pennsylvania or any other state in the country, as most bankruptcy regulations are set forth by federal law. (There are some exceptions to this general rule. For example, people who are considering filing for bankruptcy should note that bankruptcy exemptions can vary dramatically from state to state, with some states offering the option to choose the uniform federal bankruptcy exemptions instead.)
In addition to medical debts, other dischargeable debts include but are not limited to:
- Credit Card Debt
- Personal Loans
- Utility Bills
- Business Debts
- Past Due Rent
- Attorney Fees
- Social Security Overpayments
While medical costs are generally dischargeable, it is important to address one key difference between Chapter 7 and Chapter 13 bankruptcy: namely, the reorganization or repayment plan featured in Chapter 13 cases. Chapter 13 requires debtors to create a long-term, three- to five-year repayment plan with their creditors, in exchange for being allowed to keep a greater amount of property. Chapter 7 debtors have less robust property protection in bankruptcy, but do not have to make a repayment plan. Once you complete your repayment plan, you can discharge many of your debts.
Pennsylvania Bankruptcy Lawyers Offering Free Consultations
If you’re considering filing for bankruptcy in Pennsylvania, a bankruptcy lawyer of Young, Marr & Associates may be able to help. Our knowledgeable legal team has more than 20 years of experience handling thousands of cases on behalf Pennsylvania residents, and in many cases our clients are able to jump ahead financially by as much as five to 10 years.
Don’t wait for your debts to keep piling up: start getting your financial future under control today. To set up a completely free and confidential legal consultation, call Young, Marr & Associates right away at (215) 701-6519 in Pennsylvania.