Can Chapter 7 Bankruptcy Erase Medical Debt?
Medical bill debt can be burdensome. Although there are many debts that remain unaffected by filing for Chapter 7 bankruptcy, it is possible to have medical debts wiped out by filing. This is because of the type of debt medical bills are. Each kind of debt has a classification that dictates how it is seen by the government. These classifications carry over when dealing with Chapter 7 bankruptcy. The main categories debt are broken into are secured debts and unsecured debts.
▸ Secured debts are debts that are backed by a form of collateral. These kinds of debts usually deal with loans on large purchases, such as homes or cars. If a consumer falls behind on these payments, the asset can be repossessed or foreclosed upon. Medical debts do not fall under this category because they are not secured debts.
▸ Unsecured debts are debts that are not tied to any collateral, “secured” by property that a creditor can collect upon. Unsecured debt is also divided into two different categories: priority and non-priority debts.
▸ Priority debts are debts that generally cannot be discharged through bankruptcy. Examples of these debts include court ordered domestic support obligations such as child support or alimony.
▸ Non-priority general unsecured debts are in general dischargeable debts (with some exceptions, including student loans). Examples of non-priority general unsecured debts are credit card debt, unsecured personal loans, and medical debts.
There is no limit on how much medical debt you can discharge with a Chapter 7 bankruptcy. If you are facing significant debt due to medical bills and you’re considering filing for bankruptcy, consider giving us a call before you take that step. We can help you make the best decision for yourself with a free consultation. Gain the information you need and call us today.