Medical Bankruptcy: How High Debt Can be Erased

Medical bankruptcy is, sadly, one of the most common reasons for bankruptcy in the United States. The cost of medical bills can be astronomical. For those who are insured, co-pays and prescriptions that aren't covered can add up and can become prohibitively expensive, driving people into bankruptcy. For the uninsured however, things can be exponentially worse. One minor medical incident can set you back thousands if you have no insurance, and something serious like cancer or a heart attack could cost you into the hundreds of thousands of dollars. If you find yourself facing such a situation, you may wonder exactly how much debt you can get rid of during medical bankruptcy.

Understanding the Bankruptcy Laws for Medical Bankruptcy

In the United States, the law protects citizens and ensures that no one is trapped for life in a debtors prison. As such, the federal bankruptcy codes provide a measure of relief for people, no matter how much debt that person might have. Under the bankruptcy laws, there are two main types of bankruptcy that most consumers can file and that can be used to get a handle on even very high medical bills:

• Chapter 7 will allow you to eliminate your medical bills entirely. Most of your assets, such as valuable items and cash, are seized as part of a chapter 7 bankruptcy (you do get to keep retirement funds and some home equity). Those assets are sold and the money distributed among the different creditors- in this case, those who you owe money to for your medical bills. Once the proceeds from the sale are distributed, any unpaid portion of non-exempt unsecured debts is forgiven. This means that, since medical bills are unsecured debts without the special legal protections afforded to student loans, you should be able to have even high medical debts forgiven. You do, however, have to qualify for chapter 7 by passing a means test
• Under chapter 13, your unpaid medical debts don't just disappear. However, you can negotiate them down during chapter 13. In this form of bankruptcy, you enter into a 3-5 year repayment plan and at the end, any unpaid balance or balance not paid by the repayment plan is forgiven.

Getting Help

When you are dealing with medical bankruptcy, you've likely been through enough already in dealing with health and financial problems. Its time to get the help of an experienced bankruptcy attorney who can take over in dealing with the legal technicalities of the process of filing bankruptcy so you can move on with your life, debt free.