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Can you discharge your medical debt in bankruptcy?

On Behalf of | Jul 27, 2020 | Bankruptcy

Over two-thirds of bankruptcies in the United States stem – at least in part – from medical debt. Some people file after experiencing an unexpected health emergency. Yet, others do so after their medical bills pile up over time. If medical debt has led you to the brink of bankruptcy, you may wonder if it will receive discharge during proceedings. Depending on your circumstances, it may.

Medical bankruptcy does not exist

If you plan on filing bankruptcy to discharge only medical debts, you cannot do so. During the filing process, you must disclose all personal debts you owe. These may include medical debts, which then become eligible for discharge or repayment alongside your other debts. If you have no other debts, you may need to settle your medical debts with your healthcare provider.

Chapter 7 bankruptcy

Filing Chapter 7 bankruptcy allows you to discharge your unsecured debts, which are debts without collateral backing them. Since medical debt is an unsecured debt, this process will eliminate it. To qualify for Chapter 7 bankruptcy, you must pass a means test which shows your income – or your household’s income – falls beneath Virginia’s median. If it does not, you may still meet its threshold after subtracting qualifying expenses from it.

Chapter 13 bankruptcy

If your income does not pass Virginia’s means test, you will likely need to file Chapter 13 bankruptcy. You may also want to do so if you risk losing certain assets through Chapter 7 bankruptcy. By filing Chapter 13, you will structure your debts into a repayment plan. This plan prioritizes secured debts, and a court will likely order you to pay the percentage of your unsecured medical debt that you can afford to. You will then do so over a period of three to five years. So long as you remain current on your payments during this time, any remaining medical debt you have afterward may receive discharge.

When medical debts mount, you may find yourself unable to pay them in full, or at all. By filing bankruptcy, you can repay part of them or relieve yourself of them altogether. Before you proceed, make sure you have the support you need to help you understand your options.