Medical Bills

Dealing with Medical Debt in Bankruptcy

Medical bills can become overwhelming in a very short period of time. Many people cannot afford to pay for treatment in a medical emergency, whether they have suffered a stroke or broken bones. Sometimes they cannot afford to save significant amounts from their paychecks to cover medical emergencies. Even those who can save for an emergency can find themselves consumed by the costs of lab tests, procedures, and specialists' fees. If this debt becomes too much for you and your family, experienced Montgomery bankruptcy attorney Charles Grainger can help you seek financial relief.

How to Discharge Medical Debt

Unlike mortgages or car loans, there is no physical property that secures a medical debt. As unsecured debt, medical debt may be discharged by filing Chapter 7 or Chapter 13 bankruptcy. However, you should be aware that you may not selectively discharge medical debt if you file for bankruptcy. All your debts will be submitted to the trustee, who will then prioritize which debts must be paid off.

Since federal law limits how frequently you can get a bankruptcy discharge, the medical debt should be large or combined with other debt problems to make bankruptcy worthwhile. If you are expecting large expenses due to future medical treatments, you might should delay filing bankruptcy until those treatments are finished in order to maximize your protection. Often these bills don't come in for months after you are treated.

Both Chapter 7 and Chapter 13 bankruptcy are appropriate ways to discharge medical bills. Your income will help determine which type of bankruptcy is right for you. You will have to pass a means test to qualify for Chapter 7. This test requires you to have income that is less than the median income in Alabama for your household size or have deductible expenses to offset that income. The means test is a formula which attempts to estimate whether someone can afford to pay-into a Chapter 13 instead of filing Chapter 7.

If you do not pass the means test, you still may be eligible to file for Chapter 13 bankruptcy to handle your medical and consumer debts. Chapter 13 will require you to create a payment plan and repay a portion of your debt. Usually medical debt does not take first priority. Most people have non-dischargeable debts like spousal support, child support, or secured loans with collateral, such as mortgages or car payments that must be repaid first. If you need to repay mortgage payments, for example, you may not be able to repay unsecured debts such as medical bills. Nonetheless, your medical bills will be discharged at the end of the Chapter 13 process if you make all the payments owed on your plan.

If you have had a previous Chapter 7 bankruptcy discharge, a person must wait eight years to file again for Chapter 7 bankruptcy, or four years to file for Chapter 13 bankruptcy. Similarly, after obtaining a discharge from a Chapter 13 payment plan, you must wait two years to file again for Chapter 13 bankruptcy. This is why it is very important to whether the bulk of medical expenses have already been incurred before filing for bankruptcy for the first time.

Helping You Get Your Financial Life Back on Track

Experienced Montgomery bankruptcy attorney Charles Grainger can evaluate your medical bills and other debt to advise you as to whether bankruptcy is a good solution for you. We also can suggest other long-term solutions depending on your particular situation. We serve South-Central Alabama clients from our offices located in Montgomery, Prattville, and Troy. Call us at (334) 260-0500 or contact us online to schedule a free consultation.