Not all debts can be wiped away through Chapter 7 bankruptcy. But if you have a mountain of medical bills and no means to pay, filing for bankruptcy can be a solution.
Certain types of debt – including court fines, recent federal taxes, child support, alimony and most student loans – will remain your responsibility after discharge. With medical debts, that isn’t the case. Once the bankruptcy process is complete, they’ll no longer be your concern.
How Medical Bills are Treated in Chapter 7 Bankruptcy
When you file a Chapter 7 claim, your financial obligations are divided into categories.
Secured debts, which are backed by collateral or property you own, won’t go away. The same is true for priority unsecured debts, like those listed above. Fortunately, unpaid medical bills don’t fall into either category.
As non-priority unsecured debts, medical bills are eligible for discharge in Chapter 7 bankruptcy. And, there’s no limit to the amount of medical debt that can be erased.
Filing for Bankruptcy to Eliminate Your Medical Bills
People often talk about “medical bankruptcy,” but that type of filing actually doesn’t exist in the U.S. Bankruptcy Code.
While you can file for Chapter 7 to get rid of your outstanding medical bills, you can’t cherry-pick which debts to include in your claim. You must disclose all of your assets and debts – otherwise, you may be denied a discharge. And, you could even face criminal charges.
The upside? Your medical debt may not be the only financial obligation that disappears at discharge. Chapter 7 bankruptcy can also eliminate your responsibility to repay utility bills, personal loans and credit card charges.
Do You Qualify for Chapter 7 Bankruptcy?
If you’re drowning in medical debts, you should have no problem qualifying for Chapter 7. However, you will need to pass the bankruptcy means test.
The means test calculates the amount of your monthly disposable income by comparing your living expenses against your average household income. For many debtors, the test is merely a formality, one of the many steps in the bankruptcy process. If your disposable income happens to be above the current state median level, however, you may need to consider filing for Chapter 13 bankruptcy instead.
Are you ready for your medical debts to go away? The Law Office of Davis & Jones, P.C., can provide you with the expert bankruptcy advice and assistance you need.
Our team of attorneys, led by Lee J. Davis and Tony G. Jones, have decades of combined experience with personal bankruptcy filings. We’ve helped more than 20,000 Utah residents obtain debt relief, and we have the expertise to help you get a fresh financial start.
For a free consultation to discuss medical bills and Chapter 7 bankruptcy with the Law Office of Davis & Jones, contact our Salt Lake City, Utah, office today.