Impact On Nonmedical Debt
Chapter 7 bankruptcy eliminates many types of unsecured debt, including debt from credit cards and personal loans, so filing may not be a great solution if you hold other debts but only want to solve an issue with medical bills.
Debts not backed by property or other collateral are considered unsecured. Unsecured debt generally includes, but isnt limited to, medical debt, credit card debt and certain kinds of personal loans.
What Is Medical Bankruptcy
As many as 62% of bankruptcies include significant medical debt, according to a study the Maine Law Review. Despite causing so much financial stress, there is no actual medical bankruptcy.
When you file for bankruptcy, you are required to make a list of your debts. Thats stuff like credit cards, mortgages, personal loans, utility bills all the money you owe but cannot pay.
Its highly unlikely medical bills would be the sole source of debt in any bankruptcy, and all creditors are supposed to be treated fairly. You cant simply ignore the ones you dont want to deal with.
Treating creditors fairly does not mean they are treated equally, however. If the debt you owe is unsecured, meaning you havent pledged property to guarantee payment, it is put into one of two categories priority and non-priority.
Priority means those debts go to the head of the line. The government usually comes first if you owe taxes. Then comes debts like alimony and child support.
If theres little money remaining by the time medical bills get to the head of the line, its too bad for those creditors. They may get pennies on the dollar or nothing at all. Either way, youd no longer owe anything.
The main question is which form of bankruptcy is best for you?
Ask About Assistance Programs
Most hospitals have assistance programs that, if you qualify, will give you free or reduced hospital care, depending on your level of income. For instance, in some states, the Hospital Care Assurance Program will cover expenses for medically necessary services. Also, non-profit hospitals that enjoy federal tax-exempt status might have to go easier on you and other cash-strapped patients when it comes to medical billing. This might apply to you. You should contact your hospital’s financial aid counselor to find out more information and apply for applicable coverage.
To learn more about these and other options, see Managing High Medical Debts.
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Impact On Your Credit
Some of the consequences of filing Chapter 13 are identical to Chapter 7. Your credit scores will take a huge hit in a Chapter 13 bankruptcy. But with Chapter 13, the hit to your credit isnt quite as long-lasting as Chapter 7 it stays on your credit reports for only seven years, instead of 10.
Does medical debt affect credit differently than other debt?
Yes and no. Unpaid medical bills cant be added to your credit reports until theyre 180 days overdue. That extended grace period gives your health insurance provider time to pay your claim or for you to resolve billing disputes.
But just like any other debt, unpaid medical debt stays on credit reports for up to seven years. The only difference is that some credit-scoring models penalize you less for medical debt than for other unpaid bills.
Bankruptcy For Medical Bills
Medical bills can be discharged if you file bankruptcy. This is because medical bills are called non-priority unsecured debt. This means the federal government does not see the debt as a priority to be paid. In contrast, priority debt such as tax bills, child support, and most student loans cannot be eliminated.
Bankruptcy can be extremely beneficial, but there are always considerations to be aware of that may impact you by filing for relief. If you own a lot of property with lots of equity you could potentially be forced to sell some of your property to benefit your creditors. This is not a typical requirement of most people who I represent however, and most of my clients never lose anything. Few people who seek Chapter 7 bankruptcy relief have enough property with equity in it to trigger the sale of anything they own. It is something that a small number of prospective clients need to consider however. There is also the chance that by filing for bankruptcy relief that your credit score takes a hit. This is by no means guaranteed however, and many of my clients actually have a higher credit score 6 months after filing for bankruptcy relief. Each persons situation will dictate the possibility of a hit to their credit.
If you would like to move forward with bankruptcy to pay off your medical bills, it is imperative you work with a bankruptcy attorney. An attorney can ensure you are following the process correctly to safely eliminate your medical bills.
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Would You Still File For Bankruptcy If The Patient Dies
One question you should be asking yourself is what happens if your loved one dies while undergoing treatment. Does the medical bill go away, or would the doctor or collection agency still pursue payment? Would you be required to seek medical relief in the case the bill has to be paid, and you cannot afford it?
The answer to this depends on the property the deceased had, the legal relationship between the creditor and the deceased, and what California State laws demand. However, the creditor may try to enforce certain laws.
The family of the deceased has a duty of paying any outstanding medical debt incurred while the deceased was still alive. If you lack the resources to clear the debt, you should consult a bankruptcy attorney to give guidance on whether filing a bankruptcy is an option.
What Does It Mean To Declare Medical Bankruptcy
The phrase medical bankruptcy is a non-legal word for bankruptcy caused by medical debt.
Medical bankruptcy is not covered by any particular chapter of the Bankruptcy Code. However, the phrase medical bankruptcy has gained popularity in recent years due to a rise in the number of people applying for bankruptcy owing to medical debt.
While the actual magnitude of the issue is debatable, there is no question that massive medical expenditures may lead to bankruptcy.
Despite having health insurance, many people have been saddled with medical debt due to expenses not covered by their policys small print. As a result, some people have resorted to bankruptcy as a solution to their financial problems. Individuals may file for Chapter 7 or Chapter 13 bankruptcy relief to get rid of their medical debt.
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Common Mistakes To Avoid
People often risk losing their home and property to pay medical bills. Do not put your home in jeopardy by refinancing or taking out mortgages to pay medical bills. Do not withdraw money from your retirement accounts that are exempt or run up your credit cards to unsustainable amounts to pay medical bills. Bankruptcy is frequently a much better option as it allows you to keep your property.
How Are Medical Bills Treated Under Bankruptcy Of Chapter 13
Chapter 13 bankruptcy makes the repayment of the medical bills more affordable. The court will give out a suitable debt repayment plan that is easily manageable for a duration of up to five years. The payments may involve monthly installments that are 15% of your total income. However, to qualify for chapter 13 bankruptcy, itll be important to have a stable income.
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Should You File For Bankruptcy Due To Covid
The past year has been a scary time for everyone, particularly those who have been hospitalized with COVID-19. For many individuals, it made an already bad financial situation worse. Those who were already having a difficult time with their bills before the pandemic are really struggling now. Bankruptcy attorney Xue Connelly weighs in on how to handle medical debt.
The Lasting Consequences Of Overdue Medical Debt
Once you cross over to overdue medical debt, your case will go directly to collections. From there, you can expect call after call from your creditors until your debt is settled. In addition to this harassment, your creditors may employ the following debt collection methods:
- Property liens,
Essentially, your creditors will attempt to forcefully collect your money. Fortunately, bankruptcy can halt the above methods.
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What Are The Options For Dealing With Covid
If youre unable to cover a medical bill, try calling your medical providers office immediately.
Working with a doctor or hospital directly could give you more relief options, like an interest-free repayment plan, for example, says Connelly. This is a better option than many alternatives, like charging the bill to a credit card that accrues interest. The issue with this option is often when an individual cannot afford to pay their debts, they also cannot afford to keep up with a payment plan.
What Are The Effects Of High Medical Debt
Fears over medical debts can have serious and lasting consequences. Surveys indicate that almost one-third of the adults in this country have postponed a doctors visit or a surgical procedure because they are worried about accumulating medical debts.
Medical debt is linked to other financial troubles. The Kaiser Family Foundation reports that among consumers whose medical debts are referred to debt collectors, 15 percent owe more than $10,000, 17 percent are in debt to a payday lender, and one in three has student loan debt.
To compound the problem, many who are filing for bankruptcy have recently been or are now severely ill or injured. And as a consequence of COVID-19, filings for bankruptcy are likely to rise in Oklahoma and the other forty-nine states over the coming months.
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The Different Types Of Bankruptcy
Depending on your situation, there are different types, officially known as chapters of bankruptcy, that you can file for. These different chapters of bankruptcy provide different results for different cases, and its important to have some knowledge on these chapters before filing for bankruptcy.
What Are Medical Bankruptcies
Unfortunately, there is no such thing as a medical bankruptcy.
Filing bankruptcy does not allow you to pick and choose which debts you wish to discharge you must list ALL your debts, medical or otherwise.
Medical debt is one of the easiest to discharge, however, and is one of the most common reasons for filing bankruptcy.
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Government Programs For Medical Debts
The federal government provides multiple agencies that help patients clear their medical debts. They do this through sessions and consultations that educate debtors on high-interest rate charges and hostile collection practices.
In case you have done everything, but your medical bill is still too high to handle, you can approach debt relief companies which may help you to negotiate a lower bill amount without having to file for bankruptcy. They will seek to have a given percentage of the debt forgiven. This way, you will be left with a small percentage to pay.
Recovering Your Financial Health
If you’ve considered all your options and bankruptcy still seems like the best remedy, getting help is a good idea. Since bankruptcy proceedings often require you to meet with a court-approved credit counselor as part of the process, consider meeting with one pre-emptively to help you understand whether bankruptcy is necessary and to help you decide how to proceed. When you’re ready to move forward, a bankruptcy attorney can help you navigate your way through.
Medical expenses can seriously set you back financially. When this happens, bankruptcy may be able to help you get back on the right path. It’s a difficult process with significant long-term consequences, but it could offer you the opportunity to reset your finances, rebuild your credit and recover your financial health.
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Medical Debt A Leading Factor In Bankruptcy Filings
According to the American Journal of Medicine, in 2007 62% of people filing for bankruptcy cited medical debt or a loss of income due to illness as a leading reason for their decision to file for bankruptcy. Since that time, the trend has continued a large percentage of bankruptcy filers turn to bankruptcy because of high medical debts.
How Is Medical Debt Treated In Bankruptcy
Bankruptcy laws handle debt in different ways depending on whether it is secured or unsecured. Certain priority debts, such as taxes, child support, and alimony, cannot be discharged through bankruptcy. Secured and unsecured debts, however, can be reduced or wiped out completely through bankruptcy.
Secured debt are loans backed by collateral, or tangible property such as a car or home. So, your home mortgage or car loan are secured debts. Secured debts have priority over unsecured debts in bankruptcy.
Unsecured debts are not secured by collateral. Examples are credit card bills and medical bills. They have the lowest priority in bankruptcies. So, they can be eliminated entirely in bankruptcy depending on the type of bankruptcy you file.
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Discharging Medical Debt Under Chapter 13
Though not as quick as Chapter 7, Chapter 13 is more accessible to a wider range of people. In fact, if you failed to qualify for Chapter 7, then you will more than likely qualify for Chapter 13. With this type of bankruptcy, you can restructure your debt into an affordable payment plan. Typically, this plan will last from three to five years in total. After your plan reaches its expiration date, any debt remaining is then discharged.
Contact A Bankruptcy Lawyer Today
If youre considering filing bankruptcy and would like to learn more about Chapter 7 or Chapter 13 bankruptcy, contact an attorney at CMC Law today. We will help you decide what decision is best for you based on your financial situation.
You can learn more about your options by consulting with a bankruptcy attorney or by checking out more on Chapter 7 and Chapter 13 Bankruptcy. Or, start by finding out about the steps involved in bankruptcy once you decide to file.
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Medical Bills In Bankruptcy
Generally, there are two types of bankruptcy to choose from, Chapter 7 and Chapter 13. If a debtor is interested in retaining assets and paying their medical bills, then Chapter 13 may be a good option. On the other hand, if a debtor cannot afford to make the payments and wants to discharge the debt, Chapter 7 may be the better option. There are advantages and disadvantages to each type of bankruptcy. You should consult with a bankruptcy law firm in Tampa for more information about your specific needs.
Mail Your Financial Documents To Your Creditor
If youre filing for Chapter 7 or Chapter 13 bankruptcy, the court will appoint a trustee to you. The trustee oversees your case and sells any nonexempt property in order to pay back your creditors.
After your case is filed, the trustee assigned to you will send a letter asking you to send them financial documents. These can include recent bank statements, pay stubs, and tax returns. You must mail the documents promptly according to the specified instructions in the letter.
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Basics Of Medical Bankruptcy
Medical bankruptcy is not an official term or bankruptcy category, but most people think of it as a way to discharge, or do away with, immense hospital and doctor bills.
Medical bankruptcy is not an official term or bankruptcy category, but most people think of it as a way to discharge, or do away with, immense hospital and doctor bills. It can also include the loss of time and income when you take off work to heal after an accident or illness. A lack of insurance coverage or overwhelming medical insurance premiums can add up quickly, especially for larger families.
When you file for bankruptcy, you cannot limit your case to medical bills alone. You are required to list all of your outstanding debts, including medical bills. From there, your debts fall into three different categories.
The first is secured debts, where the borrower puts up an asset as collateral for their loan. If the loan fails to be repaid according to the initial agreement, the borrower can sell their collateral to repay their debt. Otherwise, the bank can seize the asset, sell it, and pay back the debt. Mortgages and car loans make up two of the most common secured debts.
The next type is priority debts, which are often government or court-ordered obligations such as taxes, child support, and alimony.
The last type of debt is unsecured debt, consisting of medical care, old utility bills, credit cards, personal loans, and borrowed money from others.
Can You File Bankruptcy On Medical Bills
With healthcare costs on the rise during this COVID-19 pandemic, it can feel overwhelming to stay on top of medical bills. If you are considering bankruptcy to absolve your medical debt, you are not alone. Outstanding healthcare costs are a significant component in many bankruptcies.
Some studies show that significant medical debt is evident in roughly 62.1% of personal bankruptcies. It is an effective way to discharge your debts and obtain a fresh start financially.
However, you should take some factors into consideration before making your decision, such as your options for bankruptcy and its impact on your credit and healthcare in the long run.
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What Type Of Debt Is Medical Debt
Medical debts fall under the non-priority unsecured debt because theyre not secured by collateral. Lenders must take legal action, win the lawsuit, and secure a judgment before they can take your property to pay your medical bills. Whether you file a Chapter 7 or Chapter 13 bankruptcy, medical debt goes at the bottom of the list of debt that needs to be repaid. In most cases, medical debt is discharged, which means it doesnt get repaid at all.
