Medical Debt and Bankruptcy

Medical debt is considered an unsecured debt and it will be discharged through Chapter 7 bankruptcy if you qualify after taking the means test. If you do not qualify for Chapter 7 because you make too much money or don’t have significant expenses other than your medical debt, then you’ll have the option to file Chapter 13. In Chapter 13 bankruptcy you’ll develop a repayment plan to pay off a reduced amount of your debt. Your repayment plan will last about three to five years and when you’ve met all requirements and satisfied all scheduled monthly payments you receive a discharge of your remaining debt, including medical bills.

Medical debt is classified as a non-priority unsecured debt. That means you can completely discharge your medical bills in a Chapter 7 bankruptcy. The Chapter 7 process is usually straight forward for most people without many assets or property and so might be the easiest way to clear your medical debt and start fresh.

A 2013 study conducted by NerdWallet shows that medical debt is the leading cause of bankruptcy in the United States. This doesn’t indicated that people without health insurance are the only people filing bankruptcy, it indicates that premiums and yearly deductibles are too high for many. The study estimates that nearly 10 million adults with year-round health insurance will have medical bills they cannot pay, potentially leading to more credit card debt and more bankruptcies to reduce and eliminate their medical debt.


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