If you have outstanding medical bills to doctors, dentists, hospitals, or other medical personnel or facilities, you may be receiving harassing phone calls or letters demanding payment. Or you might be facing lawsuits for non-payment of these medical expenses. However, immediately upon filing for bankruptcy protection, the automatic stay will stop these creditors from attempting to collect money from you, or from filing or continuing lawsuits against you.
Read on to learn more about how the automatic stay stops medical debt collection in bankruptcy, and what happens to those debts after bankruptcy.
How Does the Automatic Stay Work?
Filing for bankruptcy automatically triggers the automatic stay which stops nearly all collection actions against you and your property. It also stays lawsuits against you, and prohibits creditors from filing new lawsuits against you. The purpose of the automatic stay is to give debtors some breathing room from their financial burdens that caused them to file for bankruptcy relief.
This means that if medical debt creditors and collectors may no longer contact you by phone, mail, or other methods, in an attempt to collect the money you owe.
(For details on the automatic stay, see the articles in Bankruptcy's Automatic Stay.)
Chapter 7 and Co-Debtors
In a Chapter 7 case, the automatic stay applies only to the person who filed for bankruptcy relief. This means that if your spouse, relative, or friend co-signed or guaranteed payment of your medical expenses, creditors may continue to pursue collection actions against them.
Learn more about how Chapter 7 bankruptcy will affect your co-signer.
Chapter 13 and Co-Debtors
In contrast, in a Chapter 13 case, creditors are barred from collecting from anyone who co-signed or guaranteed a medical debt for you while your bankruptcy case is pending. Co-debtors will be protected by the automatic stay, regardless of whether they filed for bankruptcy protection.
Learn more about how Chapter 13 bankruptcy will affect your co-signer.
How Long Does the Automatic Stay Last?
The automatic stay will remain in effect while your bankruptcy case is open. For Chapter 7 cases, it will usually take about three to four months for a case to be administered, and the automatic stay will remain in effect during that time. In Chapter 13 cases, your case may remain open for three to five years. Both you and your co-debtors will be protected by the automatic stay while your case is pending, if you continue to timely make your Chapter 13 plan payments.
Exception to the Rule: When the Stay Ends Early
In some situations the stay lasts only thirty days, or does not get triggered at all. You can still ask the court to impose the stay, however.
Bankruptcy within the past year. If you filed for bankruptcy within the past year, and that case was dismissed, then the automatic stay will last only thirty days from the date you filed your bankruptcy proceeding. In this situation, you can extend this 30-day period by filing a motion with the court showing that your bankruptcy was filed in good faith.
Two bankruptcies within the past year. If you filed two or more bankruptcy cases in the last year and they were dismissed, then the automatic stay does not apply at all. Here, you must request that the court impose the automatic stay upon your creditors. Again, you must show that you filed for bankruptcy in good faith.
What Happens After My Bankruptcy Case is Closed?
The automatic stay is temporary, and terminates once your bankruptcy case is closed. If you receive a bankruptcy discharge upon the closing of your case, then typically, you will no longer be obligated to pay the medical expenses that you listed in your bankruptcy petition. This is because most medical expenses are considered general, unsecured debts, and they will be discharged in your bankruptcy proceeding. (To learn more, see Bankruptcy Discharge: Which Debts Are Wiped Out?.)
If you don't receive a discharge, or if your case was dismissed prior to receiving a discharge, then your creditors will be entitled to pursue their claims against you and your co-debtors.
If a co-debtor (who did not file a bankruptcy proceeding) guaranteed payment of your medical bills, that co-debtor will still be responsible for the balance due after your case closes. This is the case even if you received a bankruptcy discharge.