Can Bankruptcy Help with Medical Bills in Pennsylvania?
There are many reasons why people file for bankruptcy, including job loss, separation, or divorce. However, one of the most common ones is medical bills. The statistics surrounding medical debt are frightening. Every year, approximately 530,000 Americans will file for bankruptcy because of medical bills and indebtedness. On average, 65% of all bankruptcies stem from medical debt. Fortunately, medical debt is unsecured and is dischargeable through bankruptcy.
Healthcare is expensive. One medical issue could drive you and your family into a financial spiral. Some people will ignore medical debt, while others will incur other debt to pay their medical expenses. However, you have other choices. Bankruptcy is a federal legal process that provides relief from debt – including medical bills and expenses.
You might know something about bankruptcy, but it is unlikely you understand all the potential benefits. At Young, Marr & Associates, our Philadelphia bankruptcy lawyers provide professional legal representation and guidance for those facing economic hardship. Call (215) 701-6519 in Pennsylvania or (609) 755-3115 in New Jersey to discuss your options in dealing with your medical debt.
Medical Debt is Dischargeable Through Bankruptcy
There is no bankruptcy process focused solely on medical debt. While people will file for bankruptcy because of their medical debt, they are not filing a medical bankruptcy. Most people will file either a Chapter 7 or Chapter 13 case. The differences of each will be discussed shortly. However, it is important to understand what “medical debt” is.
When you file for bankruptcy, you must include all your debt. The type of debt you have is one factor in determining whether it could be discharged. Some debt, such as mortgages or car loans, are secured debt. If you want to discharge those types of debt, you will likely lose the property. Other types of debt, including certain taxes, alimony, and child support, cannot be discharged through bankruptcy. Most other kinds of debt, such as credit card bills and personal loans, are considered unsecured and are dischargeable. Medical debt, including hospital bills, medication expenses, and other costs, is unsecured debt and, therefore, dischargeable. When you meet with one of our Pennsylvania bankruptcy lawyers, we will thoroughly review the type of debt you owe.
Collection Lawsuits, Medical Debt, and Bankruptcy
Creditors have rights. If you fail to make a payment on a debt you owe, a creditor could sue you. This includes medical creditors as well. In Pennsylvania, if a creditor sues you and is successful, they will obtain a judgment lien on your home. A judgment also allows a creditor to freeze your bank account and, in some states, garnish your wages.
You should never ignore a lawsuit. If you are sued, it is crucial to call our West Chester bankruptcy attorneys immediately. You do not want dischargeable unsecured medical debt to become a secured lien against your property. In many cases, bankruptcy could be filed to stay any collection lawsuits before a judgment is entered.
What Chapter of Bankruptcy is Best for Medical Debt?
As mentioned earlier, there are two common types of bankruptcies: Chapter 7 and Chapter 13. In most cases, a filer will not have a choice regarding which chapter they will file.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is intended for individuals with unsecured debt and limited resources. Most people with overwhelming medical debt would prefer filing Chapter 7. If you qualify for Chapter 7, you could eliminate your unsecured debt, including medical bills and expenses, within four or five months. The key is qualifying.
Chapter 7 is also referred to as a “liquidation” bankruptcy. This is because a court-appointed trustee could take possession of your property, sell it, and disburse the proceeds among your creditors. Fortunately, federal and state exemptions protect most of a debtor’s assets. However, if you have non-exempt property, you might consider filing for Chapter 13.
There is also an income requirement for Chapter 7. A calculation known as the “means test” determines your current monthly income. If your income is below the median average in your area, you are eligible for filing Chapter 7. Our Pennsylvania Chapter 7 bankruptcy lawyers will explain the means test in more detail.
Chapter 13 Bankruptcy
In a Chapter 13 case, a filer proposes a plan to pay back their creditors over the next three to five years. If your income is too high for Chapter 7, you will have to file Chapter 13. While paying back your debt does not sound as good as discharging it, there are some advantages to filing for Chapter 13.
First, medical debt is typically significant. Depending on your medical issue or the treatment you had, you could be looking at tens of thousands in unpaid medical bills. While you will have to pay your credits through Chapter 13, you will probably not be required to pay the full amount. The means test determines your monthly payment.
For example, your monthly income might be too high to qualify for Chapter 7. When the Chapter 13 test is calculated, your disposable monthly income comes out to $350. This is the amount you will have to pay to unsecured creditors. Therefore, over five years, you will be required to pay $21,000 towards your medical debt and other creditors. If you had $80,000 in medical bills when you filed, you would be discharging a substantial amount of debt. The above is a simple example. Our knowledgeable Pennsylvania Chapter 13 bankruptcy lawyers will review your unique case with you.
Call Our Pennsylvania Bankruptcy Attorneys if You Are Overwhelmed With Medical Debt
Medical debt could be crippling. If you are fighting to pay your medical expenses or are ignoring them, contact Young. Marr & Associates to review your options. Our compassionate Allentown bankruptcy lawyers are available to offer legal guidance and advice. Filing for bankruptcy is often the best option available when you are dealing with overwhelming medical bills. In Pennsylvania, call (215) 701-6519 or (609) 755-3115 in New Jersey to schedule a free consultation.