Will Bankruptcy Clear Medical Debt?


Individuals can find themselves in dire financial situations for many reasons. Some of the most common reasons for declaring bankruptcy include consumer credit card debt and medical debt. If you find yourself struggling under the weight of medical bills, then you should talk with a bankruptcy lawyer in Las Vegas to learn about your options.

Medical Debt Categorized as Unsecured Debt

When you file for bankruptcy, your debt is divided into different categories. Some secured debt can’t be eliminated through bankruptcy, while others receive special priority treatment. Medical debt is considered unsecured debt and can easily be discharged by filing bankruptcy.

Eliminating Medical Debt Through Chapter 7

Certain individuals qualify for Chapter 7 bankruptcy, which is a faster and simpler way of discharging debt. You need to have a disposable income that falls below a certain level in order to qualify. If you qualify, then you can discharge an unlimited amount of medical debt by filing Chapter 7 bankruptcy.

Discharging Debt Through Chapter 13

If your income isn’t low enough to pass the means test to qualify for Chapter 7, then you can combine your medical debt with other unsecured loans in a consolidated repayment plan. In this case, the courts will examine your expenses, income, and non-exempt assets and determine a set amount you must pay monthly over the course of several years.

All of the creditors in this pool of unsecured debt will receive a percentage of the payment amount. Once this amount is paid, the rest of your debt is forgiven. However, Chapter 13 bankruptcy does have debt limits.

Individuals struggling with financial debt, including unsecured medical debt, have several options to consider. Both Chapter 7 and Chapter 13 bankruptcy filings can eliminate medical debt. By taking a look at your individual circumstances, income level, expense level, and assets, you can get a better idea of which type of bankruptcy filing will work best for your situation.

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