Does Bankruptcy Clear Medical Debt?
Your Questions Answered

You might be wondering: Does bankruptcy clear medical debt? The short answer is that yes, in most cases bankruptcy will clear medical debt. However, it's important to understand the process so that you can make the best decisions in your particular case.

Filing for bankruptcy is a common occurrence for people who have been unfortunate enough to accumulate a major medical bill. In fact, medical bills are one of the main reasons that people end up having to file for bankruptcy each year. If you've ever been around someone who has experienced a long-term illness or has gone without health insurance for a period of time, you need to understand the huge financial burden that medical bills can create are substantial and many times overwhelming.

Even having a temporary sickness can cause the medical debt to pile up at an incredible rate. This leads many people to wonder whether bankruptcy can help to clear a large medical debt. A lot of this depends on whether you file Chapter 7 or Chapter 13 bankruptcy.

Does Bankruptcy Clear Medical Debt—Chapter 7 Can

Chapter 7 bankruptcy can eliminate all of your medical bills in their entirety. It will allow you to wipe clean all sorts of debts including dental bills, hospital fees, physician fees, medical collections and almost any type of medical debt. These are considered to be unsecured debts and are treated just like credit cards when you file for Chapter 7 bankruptcy. Therefore, the slate is wiped clean as far as medical bills are concerned if you file for a Chapter 7 bankruptcy.

Chapter 13 Bankruptcy and Medical Debt

If you're in the situation where you have to file a Chapter 13 bankruptcy, medical bills are handled a little bit differently. Chapter 13 bankruptcies are court supervised and require a repayment plan which allows you to preserve your property while paying back your debts over a period of time. As it relates to medical debt, Chapter 13 will very likely allow you to get a significant reduction in the total amount of medical debt due. Normally, a Chapter 13 filing will give you the ability to pay back those medical bills over 3 to 5 year period.

Because a Chapter 13 bankruptcy is a debt repayment plan, the court is allowed to force the hand of these unsecured creditors and require them to work with you. This includes medical providers, doctor’s offices and hospitals. In the end, they usually will accept significant reductions in the total amount due on your medical bills.

Is Bankruptcy Always The Right Choice?

Bankruptcy may seem like the easiest way out of your current problems with medical debt. However, it's important to remember that filing for bankruptcy will cause long-term challenges when it comes to your credit score and financial situation. If you ever want to be able to buy a house, finance a car or even rent an apartment, it's important to note the bankruptcy will affect your credit score negatively for several years to come. Therefore, it's not something that you want to take lightly when considering or rash and rushed decision.

Other Options To Pay Off Medical Debt?

So what are your other options for clearing a large medical debt aside from bankruptcy? The first course of action should be contacting your medical providers to see if they're willing to work with you on settling your debts. Many times, they're willing to take less than what is owed if you can pay in a one-time lump sum payment. Others might be willing to put you on some kind of repayment plan that would allow you to avoid filing for bankruptcy. Of course, there's always the option of contacting a debt settlement provider who can help you negotiate with your medical creditors if needed.

So does bankruptcy clear medical debt? Yes, in many cases it does. The question you need to ask yourself is whether or not that's the route that you want to take for your personal financial situation.