What Happens to Medical Debt in Bankruptcy?

Medical debt is one of the most common causes of bankruptcy. Unlike debts caused by overspending, medical debt can be unavoidable. If you sustain a serious injury and require an expensive surgery, you can’t typically avoid having that surgery, even if you’re uninsured or under-insured. Medical debt is also unexpected—no one plans to get cancer or break an arm—and so it’s difficult to financially prepare for it. Fortunately, no matter how much you owe, bankruptcy can give you the fresh financial start you need to recover from major medical bills.

Your Discharge of Debts

There are two main types of debt: secured and unsecured. Secured debts have collateral attached to them. For example, if you have a mortgage, your house is the collateral. Unsecured debts lack collateral. Medical bills and credit card balances fall into this category, and this is good news for you. Since medical debt is unsecured, it can be completely discharged if your bankruptcy is approved.

Your Type of Bankruptcy

Your lawyer may recommend filing for Chapter 7 bankruptcy if your income can pass the means test. If the court approves your Chapter 7 petition, your medical debt will be completely eliminated or discharged. If you earn too much money to qualify for Chapter 7, you’ll file for Chapter 13. This type of bankruptcy restructures your debts, and you’ll pay back a portion of them over three to five years. In the end, however, the amount you’ll pay back toward your medical debt will likely be pennies on the dollar. And at the end of the repayment period, the remaining unsecured debts will be discharged.

Your Relationship with Your Doctor

One concern that many debtors have is whether filing for bankruptcy will affect their relationship with their doctors. Know that it’s illegal for an emergency room to turn you away because of financial reasons. You’ll always be able to go to the ER, no matter what. Other doctors do have the right to drop you as a patient, although most of them won’t. They understand that medical debts are sometimes impossible for patients to pay off.

The bankruptcy attorneys at Cutler & Associates, Ltd. are here to guide you through each step of the process. We pride ourselves on exceptional client support and personalized attention because we understand that bankruptcy can be emotionally stressful. Call our office in Schaumburg today at (847) 961-4572, and we’ll help you get on the path to financial stability.