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Can Medical Debt Be Included in Bankruptcy?

Medical bills can be “out of control.” If you don’t have health insurance, a simple trip to the emergency room because your child has a fever of 104 can set you back by hundreds, if not thousands. If you’re at-fault for a car accident but you were driving without insurance, you would be on the hook for your own medical bills, and that can cost half a year’s wages.

Or, suppose you’re an independent contractor who not only doesn’t have an employer to pay for your health insurance, but you don’t make enough to pay for private health insurance. You don’t meet the low-income requirements for Medi-Cal either.

There are many different scenarios where someone will be responsible for huge medical bills they simply can’t afford to pay. If you’re considering filing bankruptcy and you have unpaid medical bills, you may be wondering if medical debt can be eliminated in bankruptcy. In this article, we dig deeper into this issue, shedding light on the subject.

How Medical Debt is Treated in Bankruptcy

When debtors file bankruptcy, their debts are divided into separate categories; certain debts are called “priority debts” and cannot be discharged in bankruptcy. Examples of priority debts include child support, spousal support, recent taxes, court-ordered fines, and victim restitution.

If you have a lot of medical debt hanging over your head, we have good news: Medical debt is not considered priority debt. In fact, it’s treated just like other unsecured debts like credit cards and personal loans, so this means it can be discharged in bankruptcy.

Chapter 7 vs. Chapter 13

Chapter 7 and 13 bankruptcies are different. If you file a Chapter 7, all of your medical debt would be wiped out or erased. On the other hand, if you file a Chapter 13 bankruptcy, you could have to pay off all or a portion of the medical debt over the life of the 3 to 5-year bankruptcy repayment plan. Often, this means medical creditors will only receive pennies on the dollar so don’t let a Chapter 13 scare you.

Related: Can I Discharge Student Loan Debt in Bankruptcy?

To learn more about Chapter 7 and 13 bankruptcies and how bankruptcy may help you, contact our Rancho Cucamonga and Mission Viejo bankruptcy firm today.