Medical bills are usually unsecured debts. Often the debt is referred to a collections agency. If the debt is minor, collections efforts may include harassment and negative credit ratings. However, when medical bills are sizeable enough, a creditor may bring a lawsuit to collect the medical debt. A creditor that wins a debt collection lawsuit may take out a lien or garnish your wages in order to actually collect the money owed. If you file for bankruptcy before the lawsuit is filed or before a judgment is entered, an automatic stay will go into effect, stopping the creditor harassment and all other collection efforts including a lawsuit. A knowledgeable bankruptcy attorney can help individuals in Montgomery decide whether to file for bankruptcy to get rid of debt associated with medical bills.Effect of Chapter 7 Bankruptcy on Medical Bills
The costs of medical care are high. Many people file for Chapter 7 bankruptcy to eliminate medical debt, among other debts. Whether bankruptcy is appropriate for a particular debt depends on what kind of debt it is: secured debt or unsecured debt. Secured debts are those where a creditor has a lien on a piece of property and can repossess the property if you don't make a payment. Unsecured debts are those debts that are not secured by property or other collateral; they can be nonpriority debts such as medical debt or priority debts, which are usually non-dischargeable debts such as taxes, alimony, or child support.
Nonpriority unsecured debts are the last to get paid when you file for Chapter 7 bankruptcy. Usually they are discharged without getting repaid through bankruptcy. Other nonpriority debts include unsecured personal loans and credit card debts. If your primary debts are medical bills, some portion of them may be repaid by selling some of your nonexempt property. However, your liability for the remainder of the debt will wiped out by a bankruptcy discharge. For many people it is a relief to learn that there is no cap to the amount of medical debt that can be discharged in Chapter 7 bankruptcy.
Not everyone qualifies for Chapter 7 bankruptcy. You must pass a means test, which examines your disposable income and after you pass this test, you should also consider whether you have substantial assets that you do not want to lose and cannot exempt from sale. For some people, filing for Chapter 13 is a better bet.
When you file for Chapter 13 bankruptcy, you must agree to repay a portion of your debts over a 3-5 year period. As unsecured debt, medical debt will have the least priority in terms of getting repaid and may get discharged without your having to pay them at all. You may have to repay some of the medical debt, but normally not all of it. Upon successful completion of your debt repayment plan, you will be able to obtain a discharge. Because the medical bills are not secured, they can be discharged along with any other unsecured debts.Ask an Alabama Bankruptcy Attorney If Your Medical Bills Can Be Eliminated
Medical bills are among the easies debts to eliminate through bankruptcy. Bankruptcy lawyer Charles Grainger can evaluate which type of bankruptcy is more appropriate for your particular situation, taking into account unpaid medical bills, as well as mortgage arrearages, credit card debt, personal loans, car loans, and other debt you may have. We serve clients in South-Central Alabama from our offices located in Montgomery, Prattville, and Troy. Call us at (334) 260-0500 or contact us online to schedule a free consultation.