Medical care is not cheap. For individuals without adequate health insurance, it can be quite expensive. This can be true even for individuals with seemingly sufficient health insurance coverage.
If you are saddled with a significant amount of medical bill debt, you might find yourself considering filing for bankruptcy. Unlike student debt, medical debt can be eliminated through bankruptcy. Like personal debt, medical debt is considered to be general unsecured debt, which means that it is not secured by collateral. It is considered to be nonpriority general unsecured debt, which means that it is not subject to special considerations that priority debts, like tax obligations and child support, are subject to.
Using Chapter 7 vs Chapter 13 Bankruptcy to Eliminate your Medical Debt
If you qualify for Chapter 7 bankruptcy, you have the choice to file for this or for Chapter 13 bankruptcy. If you choose Chapter 7, all of your medical debt will be discharged upon the completion of your case.
Chapter 13 bankruptcy is a little bit more complicated, but can be the right choice for individuals with higher incomes and lower levels of debt. In a Chapter 13 bankruptcy case, all of the filer’s debts are consolidated into a repayment plan. This plan can take three to five years for the filer to repay under the guidance of his or her bankruptcy trustee. How much the individual is required to pay his or her creditors depends on multiple factors, such as his or her income and the value of his or her nonexempt assets.
If your unsecured debt exceeds $394,725, you cannot file for Chapter 13 bankruptcy.
Alternatives to Bankruptcy to Eliminate your Medical Debt
Bankruptcy might not be the best way for you to handle your medical debt. Talk to your lawyer about exploring alternative options to bankruptcy, which can include the following:
- Settling your debts: Contact the health care provider’s billing office to see if you can negotiate a figure at which you can settle your debt;
- Offering a down payment in exchange for a reduced total bill: If you have money to put toward a down payment on your debt, consider using this strategy to reduce your total medical bill;
- Creating a payment plan: If you can afford to pay off your debt piece by piece, this could be a strategy for you; and
- Medicaid: If you qualify for Medicaid, you can seek help with your medical debt through this program.
Work with an Experienced Rolling Meadows Bankruptcy Lawyer
If you are facing a seemingly insurmountable level of personal debt, consider eliminating it through bankruptcy. But first, speak with a bankruptcy lawyer who can help you evaluate your situation to determine the right course of action for you. You might find that you are better off choosing an alternative to bankruptcy, like settling your debt. To learn more, schedule your initial consultation with a member of our team of bankruptcy lawyers at Newland & Newland, LLP. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Samuel Zeller)