Can You File for Bankruptcy to Avoid Defaulting on Medical Bills in Pennsylvania?
Healthcare costs seem to continually rise in the United States and Pennsylvania. In a July 2020 Gallup poll, 50% of American households were extremely concerned about a major heath event leading to bankruptcy. In fact, roughly 15% of adults reported that at least one person in their family has long-term medical debt that they are unable to pay.
If you live in Pennsylvania and are feeling overwhelmed with medical bills, you are not alone. While it is difficult to determine how many bankruptcies are filed because of medical debt, it is believed that anywhere between 25% and 65% of bankruptcies consist of significant medical expenses. Fortunately, filing for bankruptcy is a way to avoid defaulting on medical bills.
Our Pennsylvania bankruptcy attorneys at Young, Marr, Mallis & Associates know how an unexpected health event can cripple a family’s finances. If your income cannot keep up with your medical expenses, you could find yourself facing lawsuits, frozen bank accounts, and liens on your home. Before defaulting on your medical bills, call our law offices at (215) 701-6519 to discuss your options.
Filing for Bankruptcy in Pennsylvania for Medical Bills Only
When you file for bankruptcy in Pennsylvania, you are not filing a “mortgage bankruptcy” or a “medical bankruptcy.” Even if most of your debt is medical-related, you must include all your debt when you file. The bankruptcy laws are designed to provide a means of relief to debtors while being fair to creditors.
In bankruptcy, medical debt is considered unsecured debt, just like credit card bills and personal loans. Unsecured debt could be discharged, or eliminated, through bankruptcy. Because all unsecured debt is treated the same, if you are discharging medical bills, you will also discharge any other unsecured debt you have.
You are not permitted to choose what debt is included in your bankruptcy. Therefore, our Allentown bankruptcy lawyers will have to include all your debts in your case, as well as all your income, personal property, and real estate. Depending on your income, assets, and debt, you could file Chapter 7 or Chapter 13 to avoid defaulting on your medical bills.
Chapter 7 and Medical Bills in Pennsylvania
Chapter 7 is the most common type of bankruptcy in Pennsylvania. Often called a straight or liquidation bankruptcy, it is what most people imagine when they think of bankruptcy. If you qualify, you could discharge most of your debt within four to six months. While not all debts are dischargeable, such as certain taxes, child support, and some student loans, medical debt is.
One of the drawbacks of Chapter 7 is that you could be required to sell your personal property and real estate to pay your creditors. Fortunately, the Bankruptcy Code and Pennsylvania law offer debtors ways to protect, or exempt, their property from being sold in bankruptcy. Before filing Chapter 7, one of our experienced Bucks County bankruptcy attorneys will thoroughly review your property to determine if it could be protected. In nearly every case, a debtor is allowed to keep their assets.
Chapter 13 Bankruptcy and Medical Bills in Pennsylvania
Unlike Chapter 7, a Chapter 13 bankruptcy case is a repayment plan that lasts three to five years. While this does not sound as attractive as Chapter 7, there are some benefits to paying your debts through bankruptcy. The amount you will be required to pay is based on the type of debt and your disposable income. Some debts, such as mortgage arrears or back taxes, must be paid back in full. However, unsecured debt, including your medical bills, is paid according to your available disposable income. You are not negotiating with creditors in Chapter 13. This means that you could be paying significantly less than what you owe and less than what your creditor would be willing to settle for outside of bankruptcy. Another advantage is that there are no tax consequences on the discharged debt. If you settle your medical bills for a smaller amount outside of a bankruptcy case, you will have to include the forgiven debt as income on your tax returns. If you are considering filing for bankruptcy, our Pennsylvania Chapter 13 bankruptcy attorneys will explain the process and calculate an estimated payment.
Keeping Your Doctor if You Discharge Medical Bills in Pennsylvania
A common fear people have when discharging medical debt is ruining the relationship between themselves and their doctors. While Congress enacted the Emergency Medical Treatment and Active Labor Act to prohibit hospitals from refusing patients without the means to pay, your doctor could legally refuse to continue to treat you if you discharge your medical bills.
Fortunately, most physicians and healthcare providers are sympathetic to why you needed to file for bankruptcy. In most cases, they will continue to treat you going forward if you are willing to pay for treatment going forward. This is especially the case when an unexpected medical emergency results in the increased expenses. However, keeping your doctor should not be a determining factor when deciding to file for bankruptcy or not. If you default on your payments, your primary physician has the same right not to continue to treat you. If you have concerns or questions regarding the impact of filing, speak with our compassionate West Chester bankruptcy attorneys.
Contact Our Pennsylvania Bankruptcy Lawyers if You Have Significant Medical Bills
If you have an unforeseen healthcare emergency, your medical expenses could quickly become overwhelming. While medical bills are unsecured, a medical provider could file a lawsuit and obtain a judgment against your home or other property. Filing for bankruptcy is a way to avoid these drastic measures and address your debt. The knowledgeable Pennsylvania bankruptcy attorneys at Young, Marr, Mallis & Associates are available to explain the pros and cons of filing for bankruptcy. If your medical debt or other financial obligations have gotten out of hand, call our law offices at (215) 701-6519 to schedule a free appointment.