The rising cost of health care is proving to be a tremendous burden on families. In fact, most people file bankruptcy because of medical bills. A study by the American Journal of Medicine, found that 62.1% of all bankruptcy cases are attributable to medical reasons. Further, the study found that 92% of the people filing bankruptcy for medical reasons had over $5,000 in medical bills. Bankruptcy is often used in these circumstances and can be a very important resource for people overwhelmed with medical bills. However, filing bankruptcy because of medical bills is not the right solution for everyone. If you are considering bankruptcy, you should consult with a Tampa bankruptcy attorney for advise about your specific situation.
Can Medical Bills be Wiped out in Bankruptcy?
Most medical bills will be dischargeable in bankruptcy. If a debt is discharged in bankruptcy the borrower (debtor) will be released from all personal liability on the debt. The discharge is a permanent court order releasing the debtor from the responsibility of having to pay the debt. Further, the discharge prohibits a creditor from taking any collection action against the borrower. Therefore, filing bankruptcy because of medical bills can be helpful because you may obtain a discharge of the debt. In most cases, obtaining a discharge will be the primary reason why a borrower files for bankruptcy. However, not all debts will be eligible for a discharge in bankruptcy. Therefore, if you are considering filing for bankruptcy you should speak with a Tampa bankruptcy attorney before taking any legal action.
Medical bills are almost always unsecured debts. Unsecured debts are loans in which the debtor does not provide any collateral for the loan. Common examples of unsecured debts are credit cards, medical bills, student loans, rent, and gym memberships. On the other hand, secured debts are loans in which the debtor provided collateral. Common examples of secured loans are home mortgages and car loans.
The classification between unsecured and secured debts is very important in determining whether or not filing bankruptcy for medical bills will be helpful. The discharge of debt in bankruptcy is only a discharge of the personal liability of the debtor. See bankruptcy law 11 USC 524. If the debt is secured by collateral, the lien on that property will not be wiped out in bankruptcy. A Chapter 7 or 13 bankruptcy only discharges the debtor’s personal liability to pay back the money. For instance, if a home mortgage is discharged in bankruptcy the bank can still foreclose on the home; however, the borrower will not be liable for any money or deficiency balance to the bank.
Chapter 7 Bankruptcy Because of Medical Bills
Often, in a Chapter 7 bankruptcy because of medical bills the medical debt becomes discharged without the debtor having to pay anything. Chapter 7 bankruptcy is also known as a liquidation bankruptcy because the debtor may be ordered by a bankruptcy court to sell certain assets as a condition of the bankruptcy. However, not all of a debtor’s assets will be subjected to liquidation by the bankruptcy court. Florida bankruptcy law provides exemptions for many of the assets a debtor might own.
If an asset is exempt from liquidation the borrower will not be required to sell the asset as a condition of filing bankruptcy because of medical bills. In many Chapter 7 cases all of a debtor’s assets will be exempt, and the debtor will not have to sell any of their property as a condition of the bankruptcy. For more information on which assets may be exempt in Chapter 7 contact a bankruptcy attorney in Tampa or click here.
Chapter 13 Bankruptcy Because of Medical Bills
Filing Chapter 13 is very different than a Chapter 7 bankruptcy because of medical bills. Chapter 13 is a restructuring bankruptcy, instead of selling assets to pay creditors the debtor creates a payment plan to pay back the amount owed. In Chapter 13, unsecured debts have to be paid the amount of money they would have received if the debtor filed for Chapter 7. Therefore, the amount, if any that will be paid for medical debts in Chapter 13 depends on the specifics facts of each bankruptcy because of medical bills case.
In some Chapter 13 cases, the debtor will not have to pay anything towards their medical bills. On the other hand, in some cases the debtor may have to pay a significant portion of the medical bills in the Chapter 13 payment plan. For information about any specific case or set of circumstances contact a bankruptcy lawyer in Tampa. The information about bankruptcy because of medical bills contained in this article is not legal advice for any individual case.
Bankruptcy Law Firm in Tampa
We understand that filing for bankruptcy because of medical bills can be a very confusing and intimidating process. That is why we work so hard to make the process as easy as possible for our clients. When you hire Florida Law Advisers, P.A., you get an experienced Tampa bankruptcy lawyer by your side throughout every phase of the bankruptcy process. We will help ensure your rights are protected, keep you well-informed every step of the way, and help you receive the utmost protection bankruptcy can offer. Regardless, if you need help with Chapter 13, Chapter 7, we will provide competent legal advice you can trust. To schedule a free consultation with a bankruptcy attorney in Tampa call us at 800 990 7763.