Many people think about credit card debt and business debt when they think about bankruptcy, but there are a lot of situations where your large stack of medical bills are the main cause. Even with health insurance, you may find that with a severe illness or traumatic injury, the medical bills start piling up and it's difficult to pay them all on time. Filing for chapter 7 bankruptcy is one option for getting rid of this stressful amount of debt. Here is what you should know about bankruptcy for your medical bills.
What types of debts are allowed in chapter 7?
The first thing you should know when filing for chapter 7 bankruptcy is that there are now different debt classifications. They will not all be treated the same, including your medical bills. There are secured debts, which includes any lien on property. It includes foreclosure on your home if you are unable to make your mortgage payments. Unsecured debts are any type of debt that is not secured by a property. Priority debts will need to be paid before others when you file for chapter 7 bankruptcy, and include things like child support and alimony.
Medical bills are in the last category of debts, called non-priority general unsecured debts. There is no special treatment for paying these debts, and they are the last to be paid when you file for bankruptcy. Aside from medical bills, they also include credit cards, and other bills not paid, such as utilities.
Will the medical debt ever get paid?
Because medical bills are considered non-priority, they will be paid last. The amount of total debt you have determines whether or not the medical bills are ever paid for. If all you have is medical bills as your debt when filing for bankruptcy, the trustee will attempt to make payments for them. However, if you have medical bills as well as a late mortgage and child support, they become last priority. A small amount of the bills might get paid, but a good portion may be wiped clean after the bankruptcy discharge.
What limitations are there?
Unlike some of the other types of debt, there aren't limitations on the amount of medical bill debt that can be discharged after filing for chapter 7 bankruptcy. The only limitation you might experience is being able to qualify for this type of bankruptcy. You must have a low enough income to show you cannot pay the medical bills now or in the future, including not being able to set up your own payment plan based on your disposable income. Contact a bankruptcy attorney such as Donald T Tesch, PS to learn more about filing for chapter 7 with medical bills.