How to get rid of Medical Debt
If you or your child gets sick or injured, getting medical attention needs to be at the top of your priorities, even if you are on a tight budget. But many insurance plans fall short of covering the bills, and because medical bills can be unpredictable, it isn’t actually easy to budget for medical bills debt. If those bills get out of hand, you might want to consider medical debt bankruptcy.
What is Medical Debt?
Medical debt is unsecured debt that you get because of medical care you received but did not pay for. It can happen because of a visit to the emergency room, or because your insurance for office visits does not cover your medical expenses, or for other medical treatments that were not paid for upfront. In some cases, the medical provider is paid, but bills are paid with regular credit cards or through loans.
There are some who may even take out a second mortgage in order to pay their medical bills. But if things are truly out of hand, there is another way to get a handle of medical debt, by filing bankruptcy.
How Medical Bill Debt is Treated in Chapter 13 Bankruptcy
When it comes to bankruptcy, most medical debt is unsecured debt, so for the sake of bankruptcy, it gets lumped in with any other unsecured debt you might have, such as credit card debt. If you took out a loan in order to pay medical bills and used some type of collateral for that loan, that portion of the medical debt may be considered secured debt.
In Chapter 13 Bankruptcy, there is a reorganization of your debt, which is paid according to your ability over a three to five year period, under the guidance of a bankruptcy trustee. In most cases, your medical debt can be included in this plan.
When you start the filing process with your bankruptcy attorney, an automatic stay will be placed on your debt, including medical bills debt so that creditors cannot pursue collections for this debt. A few types of debts are kept separate from your Chapter 13 bankruptcy plan, such as car payments and other regular bills, such as any child support, utility payments, and taxes.
Mortgage payments also usually are paid outside the bankruptcy plan, since they aren’t likely to be eligible to be discharged in three to five years.
How Medical Bills Debt is Treated in Chapter 7 Bankruptcy
If you qualify for a Chapter 7 bankruptcy, your debt may be completely discharged through the bankruptcy. In order to qualify for Chapter 7, you must pass a means test, which means that your income and assets are below the middle range for where you live.
The idea of Chapter 7 is to take your assets and liquidate them in order to pay off your debts, there are, however some exemptions that are in place, to protect your most basic needs for transportation and shelter.
In most cases, the process takes 4-6 months, and the bills, including medical bills debt, are included in the bankruptcy. When you file, you will be granted an automatic stay and you will not be pursued for your debt.
How Bankruptcy Helps You Get Rid of Medical Debt
When medical bills get truly overwhelming, filing bankruptcy is sometimes the way out of that debt, or may at least provide a way to reduce it significantly. In some cases, you may be able to negotiate some medical debt directly with creditors to show hardship, but when those efforts fall short, it may be time to talk to a bankruptcy attorney about your options.
At Nathan A Berneman, APC we handle both Chapter 13 and Chapter 7 bankruptcy in the Los Angeles, CA area. Medical bills debt is often something that just can’t be helped because of emergency situations that arose in your life. Continuing to fight creditors can cause further disruptions to your health, and filing bankruptcy for medical bills debt may be the best option for you. To learn more about the process, and how it can help you, contact us at 805-492-7045 to schedule a free consultation.