Can I Eliminate My Medical Bills Through Bankruptcy?
People facing difficult financial circumstances commonly use bankruptcy to clean their slate. Through bankruptcy, debtors have the opportunity to pay off their debt while obtaining a fresh financial start. However, there are certain limits to bankruptcy in terms of the type of debt it can help eliminate. In other words, not every debt can be discharged or eliminated through bankruptcy. Examples of debt you will not be able to discharge through bankruptcy include:
Alimony
Child support
Fines, penalties, and restitution
Filing for bankruptcy can help protect debtors against their creditors. Debtors who file for bankruptcy can obtain the protection granted by an automatic stay, which bars creditors from performing collection actions except through the court system. However, if you have any of the obligations mentioned above, you cannot use bankruptcy as a mean of avoiding them.
On the other hand, bankruptcy can eliminate most or all of your unsecured debt. Unsecured debt is any debt that is not secured by collateral. Fortunately, your medical bills are considered unsecured debt, which means they can be eliminated through bankruptcy. Generally, the discharge of unsecured debt can be achieved by filing Chapter 7, although Chapter 13 may also be an option.
Medical Bills Discharge Through Chapter 7
A Chapter 7 bankruptcy discharge will eliminate your medical bills along with other unsecured debt you may have. However, a successful discharge will depend on whether you qualify for Chapter 7. To qualify, you will need to meet specific requirements. One of the most essential elements in Chapter 7 is the means test.
The means test is designed to measure your ability to pay back your debt. If you have the necessary “means” to pay your debt, you will not qualify for a Chapter 7 discharge. This test compares your income with California’s median income to determine whether you are able to satisfy your obligations. Depending on how much you bring home, you may automatically qualify for a Chapter 7 discharge.
During Chapter 7 proceedings, the court will appoint a trustee who will be in charge of overseeing the process. This trustee will take any non-exempt property and sell it. The sale’s proceeds will then be distributed evenly among all your creditors. Once you have successfully completed your Chapter 7 – generally over a period of seven months or so – your unsecured debt (including your medical bills) will be eliminated.
Medical Bills Discharge Through Chapter 13
Often, people who don’t qualify for Chapter 7 may be eligible for Chapter 13. Through Chapter 13, debtors create a repayment plan to pay what they owe to their creditors. To qualify for Chapter 13, you must have enough disposable income to pay back your creditors according to the timetable laid out in your plan. However, your unsecured debt cannot exceed the threshold set forth by Chapter 13. For instance, if the amount of your unsecured debt exceeds $394,725, you will not be able to qualify for a discharge under this provision.
In Chapter 13, all your debts – including your medical bills – are included in your repayment plan. Once you have completed your repayment plan, you will obtain your discharge.
You should be aware Chapter 13 requires you to pay your debt by continuingly making your monthly payments. All payments in Chapter 13 must be made on time and in full. If you do not comply with the terms on your repayment plan, your bankruptcy may be dismissed by the court. A knowledgeable, experienced bankruptcy lawyer can help you determine the best course of action based on your specific circumstances.
Bankruptcy Attorneys Offering Free Consultations in California
Going through financial hardship can be a drawn-out, emotionally taxing process. That is why our professional, skilled bankruptcy attorneys dedicate themselves to offering only high-quality legal representation. Do not let a bad financial break dictate your future. Do not give up hope before consulting with an experienced California bankruptcy lawyer. If you or a loved one is facing a challenging financial situation due to medical bills, we may be able to help. To learn more about your specific situation and how bankruptcy can help, call the attorneys of The Bankruptcy Group today at .