For many people, the reality of overwhelming medical debt is all too real. With health insurance options limited to out of reach for many Americans, it isn’t uncommon for many to be pushed into financial hardship over medical care. In fact, medical debt has become a key player in the reasons behind many bankruptcy filings.
Eliminating Medical Debt
Bankruptcy can be a great tool for eliminating medical debt. Due to its unsecured nature, medical debt is easily discharged in Chapter 7 bankruptcy. When a person files for Chapter 7, their medical debt become part of the “general unsecured debt” category, which is typically eliminated through debt write-offs. In other words, the company carrying the debt will write off the debt and absolve the debtor of financial liability over the debt. In most cases, the debtor is not responsible for repaying the debt or having their assets liquidated in order to pay the medical debt unless the court determines that there are sufficient funds to do so.
Although medical debt can be managed in bankruptcy, there can be complications. First, a debtor may seek to only eliminate medical debt in bankruptcy. The bankruptcy process does not allow debts to be singled out and the debtor will be required to claim all of their debt accounts on the bankruptcy filing. Second, medical debt can be a stressful type of debt to eliminate in bankruptcy because it puts strain on the relationship between the debtor and their medical provider. Many people feel guilty filing for bankruptcy on their medical debt and prefer to enter Chapter 13, where they can repay their debts with the help of the bankruptcy court.