Many people find themselves burdened by the weight of medical debt, leading them to explore options for financial relief. Bankruptcy often comes to mind, but many people wonder whether bankruptcy can discharge medical debt.
Navigating the complex intersection of bankruptcy laws and medical debt requires a clear understanding of the factors at play.
Chapter 7 bankruptcy and medical debt
Chapter 7 bankruptcy can potentially lead to the elimination of medical debt. In a Chapter 7 bankruptcy, non-exempt assets undergo liquidation to pay off creditors, which may include medical debt. However, not all types of debt are dischargeable. Certain criteria must hold true to qualify for Chapter 7 bankruptcy relief. Understanding the eligibility requirements and limitations is important for anyone considering this option for alleviating medical debt.
Chapter 13 bankruptcy
Chapter 13 bankruptcy, on the other hand, does not eliminate medical debt outright. Instead, it provides a structured plan for repaying debts over somewhere between about three to five years. While this approach does not wipe away medical debt like Chapter 7, it can provide a manageable way for individuals to manage medical bills through a court-approved repayment plan.
Limitations and considerations
Bankruptcy can offer relief for some types of debt, including medical debt. However, it is not a one-size-fits-all solution. Certain debts, such as student loans and recent taxes, may not undergo discharge through bankruptcy. Also, it is worth considering the impact bankruptcy can have on credit scores before moving forward.
According to Forbes, about 40% of people who file for bankruptcy cite mounting medical bills as a reason for doing so. Those facing medical debt should explore all available options so they can make informed decisions about their financial future.