Nobody plans to fall ill or get seriously injured. And even with health insurance, co-pays and other out-of-pocket expenses can run into the thousands or tens of thousands of dollars.
These unexpected medical bills are one of the most common causes of financial stress. As the bills continue to pile up and collections begin calling, you probably feel like you have nowhere to turn for help.
Bankruptcy and medical expenses
Medical debt is considered unsecured debt, which means it is fully dischargeable in bankruptcy. This includes:
- Hospital bills
- Doctor bills
- Emergency room visit costs
- Ambulance fees
- Bills that have been turned over to collections
If you are in a lower income bracket or have limited assets, Chapter 7 bankruptcy may be the easiest solution. It eliminates most of your medical bills, meaning you have no legal obligation to pay them.
Many people are worried about losing their home if they file for bankruptcy. Fortunately, Florida has a strong homestead exemption that often protects your home regardless of its value or your equity. However, you must have lived in it for at least 1,215 days, and the property is less than a half-acre in a municipality or 160 acres in a rural area. You may also be able to protect your vehicle, personal property and some wages.
Other benefits of Chapter 7 are that:
- It’s quick, taking about 4-6 months from the time you file to when your debts are discharged.
- As soon as you file, it stops all collection efforts, including calls, wage garnishments and lawsuits.
If your income is too high for Chapter 7 or you’re behind on your secured debts, such as your mortgage or car loan, then Chapter 13 bankruptcy may be a better option. This type of bankruptcy gives you a 3-5 year structured repayment plan based on what you can afford. During that time, you may only pay a portion of what you owe for medical expenses. Anything that is still unpaid at the end of the plan is discharged.
You may be reluctant to file for bankruptcy, but if your medical debt is affecting your ability to meet your basic living expenses, it may be the solution you need. Discuss your options with a legal representative to determine the best path forward.
