Medical debts are one of the common reasons that many people file for bankruptcy relief. Even with excellent health insurance coverage, a person can incur thousands of dollars in medical debt after an accidental injury or sudden illness. Hospitals and other medical providers aggressively seek payment of medical debts. In some cases, a person may have no choice but to file for bankruptcy relief to avoid personal judgments and wage garnishments.
Peoria Chapter 7 Bankruptcy and Medical Bills
Medical bills are generally unsecured debts, which are eligible for a bankruptcy discharge in Chapter 7. If you meet the income requirements for a Chapter 7 bankruptcy case, you could get rid of your medical bills without paying any money toward those debts. You could also get rid of other unsecured debts, such as credit card bills, personal loans, and personal judgments.
However, some debts are not dischargeable in bankruptcy. If you owe tax debts, spousal support, child support, restitution, student loans, and other debts owed to the government, those debts do not go away in Chapter 7. You continue to owe those debts after your Chapter 7 bankruptcy case is complete.
Some debtors could qualify for a hardship discharge for student loan debt. Also, some old personal income tax debts might be dischargeable in a Chapter 7 case.
However, there are at least two critical factors to consider before choosing to file a Chapter 7 case.
Chapter 7 trustees may seize assets to liquidate on behalf of the unsecured creditors. A thorough analysis of your property and the Arizona bankruptcy exemptions by an experienced Peoria bankruptcy lawyer is necessary to determine if any of your property might be at risk. Most Chapter 7 cases are no-asset cases, meaning the debtors do not lose any property. However, a Peoria Chapter 7 bankruptcy lawyer should be consulted before filing under Chapter 7.
You may lose your home or your car if you file a Chapter 7 bankruptcy and you are behind on the loan payments. Chapter 7 bankruptcy cases are not repayment plans. Therefore, you would need to catch up on those payments, pay the debt in full, or work out an agreement with the creditor to avoid a foreclosure and repossession.
Medical Bills and Chapter 13 Bankruptcy in Peoria
Medical bills are treated the same way in a Chapter 13 bankruptcy. Medical debts are unsecured debts that can be discharged in bankruptcy. However, the creditors receive a percentage of the money owed to them through your Chapter 13 plan. If unsecured creditors are paid 20 percent, the medical providers will receive 20 cents on the dollar for their debts, if they file timely, valid proofs of claim.
Any medical debt owed after you complete your Chapter 13 plan would be discharged. The medical providers cannot attempt to collect the debt.
A benefit of Chapter 13 is that you can spread out past due mortgage payments over several years. You can also include your car loan payments in the bankruptcy plan and may pay less in Chapter 13 to pay off that debt. A Chapter 13 bankruptcy protects your assets from being liquidated too.
The downside is that most Chapter 13 plans require 60 months of payments. You cannot borrow money or sell assets without court approval during the Chapter 13 case.
Can My Doctor Refuse Treatment If I File Bankruptcy?
A medical provider may decline to continue treating you without payment up front for services. The doctor may also release you as a patient if you discharged a debt, but the doctor cannot force you to pay the medical debt. Hospitals and other emergency medical providers cannot deny service based on a discharged debt.