Can You File Bankruptcy On Medical Bills?
Written by True Tamplin, BSc, CEPF®
Updated on July 10, 2021
You can file bankruptcy on medical bills, and often get them completely discharged.
Medical bills, along with other common debts like credit card debt, are considered general unsecured debts, and are the easiest to discharge under chapter 7.
Under chapter 13, you can restructure your medical bills to make them more payable.
What Are Medical Bankruptcies?
Unfortunately, there is no such thing as a “medical bankruptcy.”
Filing bankruptcy does not allow you to pick and choose which debts you wish to discharge; you must list ALL your debts, medical or otherwise.
Medical debt is one of the easiest to discharge, however, and is one of the most common reasons for filing bankruptcy.
Can You File Bankruptcy On Medical Bills FAQs
What is Bankruptcy?
What Is Bankruptcy? The Three Chapters of Bankruptcy
There are three common types of bankruptcy known as “chapters”in the U.S. bankruptcy code, Ch. 7, Ch. 11, and Ch. 13, each with varying criteria and consequences.
Ch. 7 Bankruptcy
The most common type of bankruptcy is Chapter 7.
Chapter 7 bankruptcy is known as “straight”or “liquidation”bankruptcy.
It is designed to give a “fresh start”by discharging debts that cannot be repaid through the liquidation of the debtor’s assets.
Upon filing Chapter 7, a trustee is appointed to sell the debtor’s non-exempt assets and distribute the proceeds to creditors.
For individuals, the law exempts certain assets such as retirement funds, primary residence, tools for their trade, and personal vehicles from being liquidated to pay back creditors.
This pays back creditors some of what they are owed and protects individuals from having all of their livelihood taken from them.
Ch. 11 Bankruptcy
Chapter 11 bankruptcy is primarily for companies, allowing them a break on paying their debts in order to restructure, come up with new terms for paying their creditors, and become profitable again.
This allows companies to stay afloat while coming up with a new way to pay back creditors.
Chapter 11 is the most complex and expensive form of a bankruptcy proceeding and should therefore be considered after other options have been explored.
Ch. 13 Bankruptcy
Chapter 13 bankruptcy, known as a “Debtor in Possession”Bankruptcy, stands in contrast with Chapter 7 because it allows the individuals to keep from liquidating their property.
Chapter 13 creates a new, more affordable payment plan for the debtor to repay creditors, usually lasting 3 to 5 years.
Once the payment plan is finished, the remaining unsecured debts are discharged.