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Does Declaring Bankruptcy Eliminate My Medical Bills?

Does declaring bankruptcy eliminate my medical bills?

Did you know the United States has one of the highest costs of healthcare in the world? In 2017, the U.S. spent about $3.5 trillion on healthcare, which averages to about $11,000 per person, according to the Peter G. Peterson Foundation. High insurance premiums, deductibles, copays, and other out-of-pocket expenses are just a few of the many costs associated with health and wellness in the country. 

The rising healthcare costs are wreaking havoc on Americans’ bank accounts and credit scores. Burdensome medical bills have led many people to file for bankruptcy. In fact, Business Insider reported that medical bills are the biggest driver of personal bankruptcy in the U.S. 

If you’re struggling with medical debt, it’s important to understand the common misconceptions surrounding medical debt and how you can eliminate medical debt by filing for bankruptcy. 

4 common medical debt misconceptions

While medical debt is widespread, it is often misunderstood. Credit.com debunks these four medical debt myths: 

Myth 1: Health insurance covers everything, so you are not responsible 

Unfortunately, health insurance doesn’t always cover all the costs. It is a consumer’s responsibility to know what insurance covers and what they are responsible for paying. Be sure to go through the Explanation of Benefits (EOB) that your insurance company provides to make sure you understand what your estimated out of pocket costs are going to be.

Myth 2: As long as you make payments on your medical bill, it can’t be sent to collections

The truth is that making payments on a medical bill doesn’t necessarily keep it out of collections.  If you’re making small payments or make a payment a few days late, the provider may turn the bill over to collections. 

Myth 3: Medical collection accounts are different

While medical providers don’t usually report medical bills, collection agencies do. So, once your bill is turned over to collections, it is treated the same as other collection accounts.  

Myth 4: Paying off medical debt will help clean up your credit 

Paying off your medical debt when possible is the smart thing to do, but you will not see a dramatic increase in your credit score. 

How to eliminate medical debt by filing for bankruptcy

If you’re drowning in medical bills, filing for bankruptcy could be an affordable option to eliminate your debt. Medical debts qualify as general unsecured debts, so they are easily eliminated by filing for bankruptcy. Depending on your financial situation, you can file for Chapter 7 or Chapter 13 bankruptcy.  

What to know about Chapter 7 bankruptcy

Chapter 7 bankruptcy is more commonly filed and associated with medical debt. Chapter 7 is the simplest and quickest form of bankruptcy and is available to individuals, married couples, corporations, and partnerships. Chapter 7 bankruptcy provides for “liquidation,” which is the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors. 

If you qualify for Chapter 7, your discharge will eliminate your medical bills and most other general unsecured debts. There is no limit to the amount of medical debt you can discharge in Chapter 7 bankruptcy.

What to know about Chapter 13 bankruptcy

While many people want to file for Chapter 7 bankruptcy because it’s quick,  Chapter 13 bankruptcy is less risky. With Chapter 13 bankruptcy, your property is not at risk to be sold by the court. Instead, you develop a plan to repay what you can afford to your creditors over a period of time, which is usually 3 to 5 years. You will also most likely be able to pay creditors less than what you currently owe.

If you file for Chapter 13 bankruptcy, your medical bills are lumped in with your other general unsecured debts in your repayment plan.

Chapter 7 and Chapter 13 bankruptcy are complicated processes. At Tolar & Tolar, Attorneys at Law, we believe you shouldn’t have to manage medical debt alone, and we dedicate ourselves to making sure you get a fair shake and keep as much of your life together as possible.

Learn more about eliminating medical debt by filing for bankruptcy with Tolar & Tolar Attorneys at Law

At Tolar & Tolar Attorneys at Law, we have years of experience helping other people get themselves back on track – giving them a new and brighter economic outlook. We would appreciate the opportunity to do the same for you. Let our family help your family!

Serving the people of Millbrook, Auburn, Prattville, and Tallassee, we are your local solution to make the tough times easier. Contact us today to set up your free consultation!

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