Bankruptcy and Medical Bills

What’s the number one reason why people in this country feel compelled to file for bankruptcy? Medical bills. In a 2015 study authored released by the Kaiser Foundation, researchers found that unpaid medical bills had forced more than one million Americans to seek bankruptcy protection. If you or a loved one is overwhelmed with costs related to the treatment of an illness or an injury, speaking with an experienced bankruptcy attorney St Louis may be able to help you figure out what your options are.

Medical Bills and Chapter 7 Bankruptcy

Chapter 7 bankruptcy lets an individual who can no longer pay his or her debts get a fresh financial start. In order to qualify to file Chapter 7, you must pass a means test, which looks at the amount of disposable income available to you for paying your debts.

If you pass this means test and file a bankruptcy petition, the court will charge a trustee with overseeing the liquidation of certain of your assets. Those proceeds will then be used to pay a pro rata amount of the unsecured claims made against you by creditors. The remaining debt may be discharged.

Medical bills are considered to be a type of unsecured debt. Not all unsecured debt can be wiped out by filing Chapter 7 bankruptcy, however. You will be obligated to continue payments on priority debts such as certain types of taxes, alimony and child support. Medical bill payments, however, are not considered a priority debt.

Medical Bills and Chapter 13 Bankruptcy

Chapter 13 bankruptcy works differently. If your petition for Chapter 13 bankruptcy is approved, you will be allowed to devise a plan whose objective will be the repayment of all or a substantial portion of your unsecured and other debts within a three- to five-year term. You will be making payments on your medical bills as well as on your credit card bills.

You cannot qualify for Chapter 13 if your unsecured debt is in excess of $394,725. While that may seem like a large amount, your medical bills could easily be that high if you’ve been treated for a severe illness or injury. Consulting with a seasoned bankruptcy lawyer can help you determine whether bankruptcy is the right option for you.