Bankruptcy and Medical Debt: All you need to know

Healthcare costs continue to grow throughout the United States and are gradually becoming one of the highest expenses that millions of Americans are forced to bear. An excessively high medical bill can easily destroy your finances, especially in 2020 when you could suddenly have to pay a medical bill of over $1 million after surviving a Covid-19 infection. In light of this alarming reality, it’s not surprising that medical debt is the cause of about 40% of bankruptcies each year in the United States.

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If, after suffering an illness or injury, you find yourself overwhelmed by medical bills, you may want to start considering adding to that growing statistic, and filing for bankruptcy to get the financial relief you need.

However, you should keep in mind that bankruptcy is not as simple as it seems. This process can be extremely complicated for those who are unfamiliar with it. Therefore, you should do your homework and inform yourself as much as you can before proceeding. Furthermore, it would also be a good idea to work with a bankruptcy attorney near you to avoid mistakes during the process, and KT Bankruptcy Lawyer can be an excellent option.

KT Bankruptcy Lawyer is a Los Angeles law firm committed to helping its clients get a fresh financial start through bankruptcy. If you want to know how they can help you achieve this, visit their website or contact them for a free consultation.

What type of debt are medical bills?

In bankruptcy, your debts are divided into two types: Secured and unsecured debts. Secured debts are those that have collateral that the creditor could repossess if the debt is not paid. Some examples are car loans, mortgages, and personal loans with collateral.

On the other hand, there are unsecured debts, which are those where the creditor has no collateral. Some examples of this type of debt are past due utility payments, credit card debt, personal loans without collateral, and of course, medical bills.

This means that medical debts are dischargeable through bankruptcy since the process takes care of eliminating most of your unsecured debt. If you incurred these debts before your bankruptcy filing, the process can help you get rid of them.

Medical debt in Chapter 7 bankruptcy

Chapter 7 bankruptcy is designed to help those who cannot afford to pay their debts get a fresh financial start. It is an ideal alternative for those who are looking for a quick solution to their debt problem since the process only takes from four to six months.

In this case, after qualifying through a means test, a trustee will sell your non-exempt assets and use the proceeds to pay your creditors. However, chances are that all your belongings will qualify as exemptions, so you could get a discharge without having to sell anything at all.

Under this scenario, your medical debts won’t be very high on the priority list, so your medical provider probably won’t receive full payment of the debt, or none at all.

Medical debt in Chapter 13 bankruptcy

If you have non-exempt assets that you want to keep, or your monthly income is high enough, a Chapter 13 bankruptcy may be a better fit for your situation.

In this type of bankruptcy, you will need to work with your attorney to create a payment plan that will help you eliminate your debt over a 3-5-year timeframe. After this period, your remaining debts will be discharged.

This Chapter is designed to give you the time to pay off most of your debts (both secured and unsecured), so your medical provider may be able to receive a portion of the stipulated payment or the full amount.

Recover your financial health

If you are drowning in debt, bankruptcy can give you the economic relief you need to start regaining your financial health. However, the success of your process depends on not making any mistakes. That’s why you should consider working with a bankruptcy attorney near you.

The team of legal professionals at KT Bankruptcy Lawyer is always willing to do everything in their power to help you get the fresh financial start you need. Feel free to call them for a free consultation.

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