Unexpected medical bills can financially devastate a family for many years to come. The rising cost of health care is proving to be a tremendous burden on families. 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 used so often because it can wipe out all your medical bills. See Bankruptcy law 11 USC 524. This is because medical bills are almost always an unsecured debt. Unsecured debts are loans in which the borrower does not provide any collateral for the loan. Other examples of unsecured debts can include credit cards, student loans, rent, and gym memberships. When a debt is discharged in bankruptcy, the borrower will be released from personal liability on the debt. For more information about a specific bill or case, contact a Tampa bankruptcy law firm for advice.
The classification between unsecured and secured debts is significant in bankruptcy cases with medical bills. The discharge of debt in bankruptcy is only the 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. The lien on the collateral generally survives a bankruptcy. 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.
Most medical bills do not have any collateral. Therefore, when the debt is discharged, the borrower will be released from personal liability on the debt. See bankruptcy law 11 U.S.C § 727. Further, the discharge prohibits a creditor from taking any collection action against the borrower. Banks are not to allowed to call you, send bills, or take any other action to collect on a debt that was discharged.
Medical Bills in Bankruptcy
Generally, there are two types of bankruptcy to choose from, Chapter 7 and Chapter 13. If a debtor is interested in retaining assets and paying their medical bills, then Chapter 13 may be a good option. On the other hand, if a debtor cannot afford to make the payments and wants to discharge the debt, Chapter 7 may be the better option. There are advantages and disadvantages to each type of bankruptcy. You should consult with a bankruptcy law firm in Tampa for more information about your specific needs.
Medical Bills in Chapter 7
It is very common for medical bills to be discharged in Chapter 7 without any payments to the creditors. In Chapter 7, the debtor does not make monthly payments to their creditors. Instead, non-exempt assets may be liquidated to pay back the debts. Exempt property is classified as assets that you do not forfeit when filing for bankruptcy and are entitled to keep. Before you file for bankruptcy, it is essential to know which exemptions you qualify for. The amount and type of exemptions you are eligible for may impact your decision on whether to file for Chapter 13 instead.
If an asset is exempt, the borrower will not be required to sell the asset as a condition the bankruptcy. It is very common for borrowers to file Chapter 7 and not lose any assets at all. In many cases, the exemptions will protect all of a borrower’s assets. For more information on the potential for liquidation in Chapter 7, contact a bankruptcy law firm.
Medical Bills in Chapter 13
Unlike Chapter 7, Chapter 13 requires a debtor to create a payment plan. The payment plan should outline how the income the borrower receives will be used to pay medical bills. The allocation of payments must be feasible for both the borrower and creditor. Additionally, the plan must provide for secured claims to be paid value of the collateral it secures. However, exceptions can be made if the creditor agrees to accept a lower amount, or the debtor surrenders the property. On the other hand, unsecured claims only receive as much as they would have received if the debtor filed for Chapter 7.
Most often, medical bills are unsecured debts. Therefore, the amount that will need to be paid depends on the specifics of each case. In some instances, a borrower will not have to pay anything at all towards medical bills in Chapter 13. However, in other cases, they will be required to pay a significant portion of the medical debt.
Medical Bills from COVID
As of now, there is no specific relief to help borrowers deal with medical debt from COVID. Although the President worked with insurance companies on waiving the fee for testing, very little was done for the actual treatment. There is no specific legislation that will help with medical bills incurred from COVID. Even for those who have health insurance, the medical bills from coronavirus can be staggering.
Do I Include My Spouse in the Bankruptcy?
Under Bankruptcy law, a married couple may file for Chapter 7 or Chapter 13 bankruptcy either individually or jointly as a married couple. See 11 USC 302. However, simply because a married couple can file a joint bankruptcy petition does not mean they should jointly file bankruptcy when married. Contact a bankruptcy lawyer to review the circumstances of your case and help you choose a course of action that is best for your specific situation.
Consult a Bankruptcy Law Firm in Tampa
If you are burdened with medical bills, Florida Law Advisers, P.A. may be able to help. Our bankruptcy attorneys in Tampa have years of experience helping people solve their financial problems with bankruptcy. We combine our experience and skills in the courtroom to help achieve the results our clients need. Regardless, if you need help with Chapter 13 or Chapter 7, we will provide the competent legal advice you can trust. To schedule a free consultation with a bankruptcy attorney at our firm, call us at 800 990 7763.