Can You Get Relief from Medical Debt Through Bankruptcy?

 Posted on October 14, 2024 in Medical Debt and Bankruptcy

The cost of healthcare is a major concern for most Americans. Although many believe bankruptcy is primarily caused by frivolous credit card spending, healthcare costs are now the number one cause of bankruptcy for American families. More than 56 million people across the United States struggle to pay medical debt, with almost nine percent of these unable to pay anything toward their medical bills.

Eleven million people used high-interest credit cards to pay their medical debt, but they eventually became unable to pay the credit card debt. Perhaps the most dismaying statistic is that 90 percent of those with homes took out a second mortgage to pay their medical debt. Further, the 56 million people with significant medical debt are not extremely poor—they are middle-class college graduates who are also homeowners.

The result is that 62 percent of the two million personal bankruptcies filed yearly can be directly tied to medical debt. Bankruptcy can end up being the only realistic way to address crushing medical debt. If you feel like you are drowning in medical debt, speaking to an experienced College Park, MD bankruptcy attorney from The Law Office of Donald L. Bell can give you hope for the future.

Dischargeable vs. Non-Dischargeable Debt

Not all debt can be discharged or forgiven through a bankruptcy filing. Typically, dischargeable debts include:

• Medical debt
• Credit card debt
• Personal loans
• Promissory notes
• Debt from civil lawsuits
• Debt resulting from a car accident (only if you were not intoxicated)
• Some leases

Non-dischargeable Debts include:

• Regular child support payments
• Any debts associated with a criminal judgment
• Most student loans
• Tax debts that are less than three years old
• Judgments for injuries or death resulting from drunk driving

Under certain circumstances, some non-dischargeable debts may be discharged, but only if you can show you are unable to repay those debts. For example, although federal student loans are considered non-dischargeable debt, you could ask that those debts be forgiven. On the flip side, if a creditor objects to a dischargeable debt being discharged, it might not be allowed to be discharged under a bankruptcy filing.  

Is Chapter 13 or Chapter 7 Bankruptcy a Better Choice for Handling Medical Debt?

Chapter 7 bankruptcy can potentially discharge all your medical debt, with no limit on how much debt relief is available for medical costs and medical care, with no repayment necessary. Those who file for Chapter 7 bankruptcy must pass the Means Test to qualify. The Means Test looks at your state’s average income and your income minus necessary expenses. If the Maryland median income is more than your monthly income, you can file for Chapter 7. If you require more disposable income to cover specific expenses, you may also be able to file for Chapter 7.

Chapter 13 will discharge some of your medical debt, but probably not all of it. Chapter 13 bankruptcy requires a repayment plan based on your specific bills, income, assets, and other expenses. Only those who can meet a monthly repayment plan will qualify for Chapter 13 bankruptcy, plus Chapter 13 has debt limits. In 2024, the debt limit for unsecured debt is $465,275 – this is for all unsecured debt, not just medical debt. Depending on the amount of your debt, you could have up to 70 percent of the debt dismissed, and you would be required to make the remainder in monthly payments.

Contact a Prince George’s County, MD Medical Debt Bankruptcy Lawyer

If you feel as though you will never be able to get out from under your medical debt, it could be time to speak to a Greenbelt, MD medical debt bankruptcy attorney who can help you determine whether bankruptcy is your best option. Attorney Donald L. Bell is currently the chair of the National Bar Association’s Bankruptcy section and has more than 20 years of experience with a special focus on saving homes. Contact The Law Office of Donald L. Bell at 301-614-0535 today for a free consultation for consumer bankruptcy cases.