With the high cost of medical insurance and medical care, it’s easy to quickly amass considerable medical debt. Fortunately, chapter 7 bankruptcy can eliminate unpaid hospital bills quickly and for very little cost. However, not everyone qualifies for chapter 7 bankruptcy.
Medical bills are dischargeable in bankruptcy as unsecured debt. Just like credit cards, medical debt is general unsecured debt that falls within the scope of a chapter 7 bankruptcy discharge order.
Who Owns The Medical Debt
Part of filing chapter 7 bankruptcy is listing creditors and their addresses. When it comes to old medical debt, figuring out who currently owns the collection account can be challenging. Simply put, your old medical bills may list the original creditor or collection agency, but that account could have been sold in the interim. In addition, credit reports frequently list credit card accounts, but for some reason, old medical debt rarely appears. If you think that medical bills are missing from your credit report, even listing a last known creditor is better than not reporting the account.
Do You Qualify For Chapter 7 Bankruptcy
While chapter 7 bankruptcy is an excellent way to eliminate medical bills, not everyone qualifies for chapter 7 bankruptcy. Moreover, even if you qualify for chapter 7 bankruptcy, you may not want to file under that chapter if you would lose assets.
To qualify for chapter 7 bankruptcy your income for the past 6 months must fall below a certain threshold that is determined by the median household income for a household of your size. If your income exceeds that threshold and you don’t pass the means test, you probably won’t qualify for chapter 7 bankruptcy. However, you may still qualify for chapter 13 bankruptcy.
Even if you qualify for chapter 7 bankruptcy you may not want to file if you have significant assets. In chapter 7 bankruptcy the Trustee can sell assets that are not protected by exemption laws. Accordingly, individuals with significant assets or who own real estate may not want to file chapter 7 bankruptcy to eliminate medical debt. In those cases, chapter 13 bankruptcy where clients can keep their assets may be a better option. Speak with a bankruptcy attorney to learn whether you can protect your assets in chapter 7 bankruptcy and eliminate your medical debt.