Can You File Bankruptcy On Medical Bills?

Sometimes, bankruptcy can provide a solution to overwhelming medical bills. It also allows you to start over financially. You have spent a lot of your adult life reading and hearing that personal bankruptcy is a terrible consequence of financial mismanagement. It should be avoided at all costs. This advice is probably wrong for many. Personal bankruptcy on medical bills can often be a solution. It allows you to eliminate huge amounts of debt, which is often associated with high medical bills and gives you the chance to get a fresh start. This is how bankruptcy should be viewed.

Medical Debt Has A Widespread Impact

Let’s start by addressing the “scarlet letter” myth about bankruptcy. We also need to clarify why so many Americans find themselves in a financial bind. It’s not usually because you can’t afford cars, vacations, or jewelry. Health care is more likely to be the reason. It’s simple and straightforward. Let’s be clear, you aren’t the only one. No matter what age you are, medical debt that is out of control is the main cause of filing for bankruptcy.

A recent poll found that 26 percent of Americans have had difficulty paying their medical bills in the last year. A further 12 percent of Americans, or about half of the group, say that bills have had a significant impact on their families.

Senior citizens face even greater difficulties.

The New York Times identifies three related issues that have been slowing down Americans for years. More seniors are filing bankruptcy on medical bills because of: “Vanishing Pensions, Soaring Medical Expenses, Insufficient Savings.”

A new study conducted by the University of Illinois, and three of his colleagues provides shocking details about the percentage of Americans who declared bankruptcy between 1991-2016:

  • An increase of 66 percent in the number of people 55-64 years old
  • An increase of 204 percent in the 65-74 age group

A study found that 6 out of 10 people 65 years and older file bankruptcy on medical bills because they cannot afford to pay for their huge bills.

The National Council on Aging states that medical credit is the biggest obstacle to economic well-being. More than 84 percent are living with at least one chronic condition. A study published in the Journal of General Internal Medicine adds that out-of-pocket medical expenses in the five years preceding a person’s death amounted to more than $38,000. This leaves one in four seniors in danger of going bankrupt.

You Have a Choice of Filing Options

There are two clear options in bankruptcy law that will allow you to solve your out-of-control medical bills.

Chapter 13

Chapter 13 bankruptcy: Chapter 13 typically allows you to keep your assets while you repay a portion of your debt over five years. Any remaining debt is discharged at the end of the case. You can also file a Chapter 13 bankruptcy to discharge your medical bills. Your creditors cannot take any action against you.

Chapter 7

Chapter 7 bankruptcy: This method allows you to pay off all your medical debts (and any other unsecured debt) within the first half-year of filing. This is also the most efficient way to eliminate all hospital bills. Chapter 7 allows you to start over.

Retirement accounts include 401(k), 403 (b), profit-sharing, and other accounts. Generally, they are exempt from bankruptcy because federal bankruptcy law prohibits them from being liquidated in bankruptcy proceedings.

Chapter 13’s “Keep-your-assets” provision allows you to save your home from being foreclosed. You can also reschedule any secured debts, other than mortgages for your primary residence. This will likely reduce your monthly payments. Chapter 13 allows you to make plan payments, which are then distributed to creditors. This eliminates direct contact with creditors.

Chapter 7 bankruptcy requires that you pass a “means check” to ensure your monthly income does not exceed certain guidelines. Senior citizens will be happy to know that the means test does not include Social Security benefits. It’s important to find an experienced local bankruptcy lawyer.

Contact Our Office Today

Bruner Wright is the top-rated experienced bankruptcy lawyer in South Georgia and the Florida Panhandle. Our team has more than 30 years of experience helping people file Chapter 7 bankruptcy. Chapter 11 bankruptcy. Chapter 12 bankruptcy. Chapter 13 bankruptcy. Our practice has been very successful in helping people discharge their debts. We offer a personal service that is comprehensive and thorough in all aspects of our industry. We are responsive to the needs of our clients.

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Contact us today to schedule a consultation to find out if bankruptcy is the best option. A member of our team will review your case to help you make the right choice. We are focused on consumer bankruptcy. We want you to achieve financial stability.