Healthcare in the United States is expensive. According to one study, almost 2/3rds of all bankruptcies were related to medical issues. Even with insurance, patients may come out of a procedure or overnight stay with a hospital bill in the tens of thousands of dollars.
With the high cost of health care, it is no surprise that medical expenses are one of the common reasons individuals have for filing for bankruptcy. A sudden illness, cancer diagnosis, or catastrophic injury can make a family go from financially secure to seriously in debt, almost overnight.
Bankruptcy is an opportunity for individuals who are in serious medical debt to get a fresh start. Filing for bankruptcy can stop collections and creditor phone calls. At the end of the bankruptcy procedure, debtors can be discharged from much of their debt and begin rebuilding their financial life.
If you have any questions about filing for personal bankruptcy because you are overwhelmed by medical bills, talk to your experienced Missouri bankruptcy attorney to understand your options. Contact the Joshua Wilson Law Firm today at 816-331-9968.
Are Medical Bills Dischargeable in Bankruptcy?
Dischargeable debt refers to the debt that can be cleared away through bankruptcy. Certain debts are dischargeable and others are generally not dischargeable. Nondischargeable debts may include student loans, child support, and alimony.
Generally, medical bills and healthcare expenses are dischargeable in bankruptcy. At the end of the bankruptcy process, the court may issue a discharge that states the debtor does not have to pay remaining dischargeable debts. This may include:
- Doctor bills,
- Hospital bills,
- Ambulance bills,
- Surgical expenses,
- Medical device costs, and
- In-patient and out-patient treatment.
However, if the individual is continuing to receive medical treatment, any continuing costs after bankruptcy will not be erased. Future medical expenses may create new debt if the patient is not able to afford the expenses.
Chapter 7 or Chapter 13 Bankruptcy for Medical Debt?
Chapter 7 or Chapter 13 bankruptcy can help individuals clear or manage their medical debt. Generally, Chapter 7 bankruptcy sells off most assets and wipes out dischargeable debt. Alternatively, Chapter 13 bankruptcy allows the individual to reorganize their debt and pay off outstanding debts over time, which also allows the debtor to keep much of their property.
There are different benefits and drawbacks to each type of bankruptcy. There are also requirements in order to qualify for each type of bankruptcy, including limits on income and limits on debt.
Benefits of Bankruptcy for Medical Debt
There are a number of benefits to filing for bankruptcy when saddled with medical debt, including:
Silence from Creditors:
The first difference many people notice is that the phone calls and harassment from bill collectors and creditors come to an end. An automatic stay goes into effect after filing and bill collectors are prohibited from calling, sending collections letters, foreclosing on your property, or trying to repossess your car.
Keep Exempted Property and Assets:
Most liquid assets will be turned over to the trustee in a Chapter 7 bankruptcy, to be sold, with payments made to creditors. However, there are exemptions under Missouri law where debtors can keep certain property away from the trustee. Some of the exemptions include:
- $5,000 homestead exemption,
- $3,000 vehicle equity,
- 75% of wages (or 30 times the federal minimum wage), and
- Certain employee and retirement benefits.
Medical Debt is Erased After Discharge:
At the end of the bankruptcy process, outstanding dischargeable debt is erased. This can help an individual begin to rebuild their financial life.
Drawbacks of Bankruptcy for Medical Debt
There are also some drawbacks to filing for bankruptcy. You should consider talking to an attorney before filing to understand the limitations to bankruptcy and what type of filing is the best option for you and your family. Some drawbacks of bankruptcy may include:
- Not all debts are dischargeable,
- Only able to file for Chapter 7 every 8 years,
- It may impact your credit rating,
- You could lose your home or other property, and
- Bankruptcy will not protect fraudulent transfers.
Alternatives to Bankruptcy for Medical Bills
Bankruptcy may not be the right option for you, even with a lot of medical debt. An individual may have too high of an income to qualify for Chapter 7 bankruptcy or they may not want to put their home at risk of liquidation. Talk to your Missouri bankruptcy attorney about ways you can reduce your medical debt. The hospital may not want to help modify your bill or come up with a manageable payment plan but a phone call from your attorney can make a big difference and the hospital may suddenly be willing to negotiate.
Missouri Bankruptcy Lawyer for Medical Debt
An illness or medical emergency can change your financial outlook overnight. An illness can put a wage-earner out of work or require expensive medical care for a child, elderly parent, or spouse. Medical debt bankruptcy can put an end to bill collectors, protect your most important assets, and help you make a fresh start.
If you have questions about filing for bankruptcy in Missouri, contact the Joshua Wilson Law Firm in Raymore today. Contact us online or by calling (816) 331-9968. We maintain a virtual capable law office to keep you safe and connected.