Do Medical Bills Qualify for Bankruptcy?

Do Medical Bills Qualify for Bankruptcy?

If you or a loved one has received a heartbreaking medical diagnosis, been injured in a car accident, or wound up in the hospital after a serious illness, you may be wondering, “Do medical bills qualify for bankruptcy?” The answer is typically “yes.”

Medical bills account for 40% of bankruptcies, according to the National Institutes of Health (NIH). An estimated 530,000 families file bankruptcy annually for issues related to medical bills and/or lost wages due to illness or injury.

Significant medical debt is a nationwide problem for many Americans. A Kaiser Family Foundation study titled “The Burden of Medical Debt” showed that 1 in 4 American families are “having problems paying medical bills.” The report goes on to say that 7 in 10 survey respondents said that high medical bills caused them to:

  • cut back or delay vacations or major household purchases (72%)
  • reduce spending on food, clothing and basic household items (70%)
  • use up all or most of their savings (59%).

If your family is struggling to pay medical bills on time and there is no end in sight, bankruptcy may be an option. It can give you a fresh start and put you on a firmer financial footing.

Are Medical Debts Dischargeable in Bankruptcy?

How Do You Get Medical Debt Forgiven?

Like several other types of debt, medical debts are dischargeable in bankruptcy if you follow the guidelines and qualify under various bankruptcy chapters. In Florida, you must pass a means test to qualify for Chapter 7, the most frequent type of bankruptcy. But even if you don’t qualify for Chapter 7, you can file Chapter 13 or another chapter and list medical debts on your petition. Some of the most common types of debt listed on bankruptcy petitions include medical debt, credit card debt, personal loans, and department store revolving accounts.

Common types of medical debts that can be discharged in bankruptcy include:

  • Doctor bills
  • Hospital bills
  • Laboratory, MRI, CT scan, and other medical tests
  • Rehabilitation services
  • Pharmaceutical costs
  • Medical equipment bills.

If you are wondering whether your medical bills qualify for discharge through bankruptcy, the best way to find out is to speak to a skilled and affordable bankruptcy attorney.

Can You Lose Your Home Over Medical Bills?

Massive medical bills can affect every area of your life, making money tight and leaving little left over to pay other bills, like your mortgage or rent. A debt collector for a medical bill cannot threaten to take your house. But if you let unpaid medical bills pile up unchecked, you could back yourself into a corner where you have fewer and fewer financial choices.

When you file for bankruptcy due to medical bills, you can often remain in your current home. Filing bankruptcy can often stop foreclosure proceedings. Whether Chapter 7 or Chapter 13, a skilled bankruptcy attorney can help you explore which option is best for you and your family and how you can maintain a viable living arrangement.

Medical Debt and Your Credit Score

Another thing to keep in mind is the impact of unpaid medical debt on your credit score. Overdue medical bills can cause significant damage to your credit score, driving it down 50 to 100 points or more in some cases. Nearly 3 in 10 Americans had unpaid medical debt sent to a collection agency, according to a recent Consumer Reports survey. Medical debts make up about half of the collection amounts and negative information on credit reports, which affect 43 million Americans. Having a low credit score can make other things much more difficult, including getting a mortgage, a job or insurance.

What Happens to Medical Bills after Filing Chapter 7?

After filing Chapter 7, all phone calls and letters from debt collectors must stop. Even if you have large medical bills, debt collectors can no longer harass you. You will want to list on your bankruptcy petition all doctors, hospitals, clinics, nursing homes, medical equipment providers, and others to whom you owe money. Don’t leave anyone off the list or you risk still being responsible for these debts after the bankruptcy is discharged. It usually takes a few months to complete a Chapter 7 bankruptcy.

Different Types of Bankruptcy

Chapter 7
Chapter 7 is often referred to as a “fresh start” or “liquidation” bankruptcy. I can enable you to discharge unsecured debts such as medical bills, credit cards, installment loans and others. It stops, resolves, or prevents repossessions, loan deficiencies and wage garnishments. It can help you eliminate bills you can’t afford while holding onto assets like your car and house.

Chapter 13
Chapter 13 is often referred to as “reorganization” bankruptcy. It enables you to repay some financial obligations affordably in one monthly payment over a 3- to 5-year period. Once you have completed this court-approved repayment plan, other remaining debts can be discharged. Chapter 13 can halt foreclosure on your house or repossession of your vehicles.

How Do I Protect My Assets from Hospital Bills?

The best way to protect your assets from hospital bills is to be proactive when you see that you’re falling behind on payments. Rather than hiding and letting medical bills pile up on the counter unopened, it is better to face them head on and consider your financial options. Filing bankruptcy before things are completely out of control can be a way of preventing foreclosure or repossession of assets.

Statute of Limitations on Debt in Florida

The statute of limitations on collecting medical debt in Florida is typically five (5) years (§95.11, Fla. Stat.). Keep in mind, though, that this does not mean the debt is eliminated after five years – you still owe it. This simply means that a debt collector can no longer take legal action against you. If the unpaid debt is not paid in full, it will remain on your credit record and negatively impact your credit score even if the five-year statute of limitations has passed and creditors are no longer calling you.

Contact Our Skilled Bankruptcy Lawyer Today

If you are struggling under insurmountable debt and don’t know where to turn, it may be time to talk to an affordable bankruptcy attorney. At Adam Law Group, our attorneys are skilled and compassionate, and we will walk beside you throughout the bankruptcy process. We have helped countless clients get back on their feet and make a fresh start. To find out how we can help, call us at 904-329-7249. We offer personalized insights on debt relief with no further obligation.