It’s no secret that healthcare in the United States is expensive, even if you have health insurance. Even though 90% of Americans have some form of medical insurance, 3 million still owe more than $10,000 in medical bills.
It might not sound like crippling debt, but with more than a third of the population working for $15/hour or less, medical bills can cause significant financial distress.
When you’re drowning in medical bills with no end in sight, you may start to consider filing for bankruptcy. A Bankruptcy Law Firm, LLC, has helped hundreds of Missouri and Illinois residents file for medical bankruptcy and wipe away their debt.
By the end of this article, you will know how you can file bankruptcy for medical bills, how it works, and when you should start filing your case.
Can You File Bankruptcy on Medical Debt?
Yes, you can file bankruptcy for medical bills if they are too much for you to repay with your current salary. In fact, 66.5% of people (that’s 550,000 per year) who file for bankruptcy cite the reason as being medical debt.
When you file for bankruptcy, it can completely discharge all of your medical debt and even other debts such as credit cards, unpaid rent, utilities, and other unsecured debt.
Chapter 7 vs. Chapter 13 Bankruptcy for Medical Bills
There are two types of bankruptcy you can file for medical debt: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy for Medical Debt
When you file Chapter 7 bankruptcy, your debt will be completely wiped away or “discharged.” It is the fastest way to get rid of unsecured debts.
However, you must pass the Chapter 7 Means Test. That means your income must meet certain limits set by the state, depending on the number of people in your household.
Most people who file for bankruptcy due to medical debt are eligible for Chapter 7 bankruptcy.
Chapter 13 Bankruptcy for Medical Debt
In some cases, if you do not pass the Chapter 7 Means Test, then you can file for Chapter 13 bankruptcy. While this type of filing does not completely discharge your debt, it creates a 3 to 5-year repayment plan to help you minimize the overall debt and catch up on missed payments.
Signs You Should File Bankruptcy for Medical Bills
When you receive medical bills charging tens of thousands (or sometimes hundreds of thousands) of dollars for treatment, hospital stays, and ongoing care, it can feel like you’re falling into a hole that you can’t climb out of.
If you can relate to any of the signs below, then it’s time to consider filing for bankruptcy to get rid of your medical bills.
You Can Only Make Minimum Payments
If you’ve set up a repayment plan for your medical bills or even your credit cards or personal loans, and can only make the minimum payments, it’s time to file for bankruptcy.
Making just the minimum payment can ward off debt collectors, but it means the interest is piling up, making the overall bill even more unmanageable.
You’re Using Credit to Pay for Medical Expenses
Do you find yourself putting essentials like rent, medical bills, utilities, and groceries on your credit card or using a personal loan to pay for them? It’s time to get control of your debt and start with a clean slate. Don’t put yourself into more debt just to get by.
Your Medical Debt Has Gone to Collections
Getting calls and house visits from debt collectors for your medical bills can feel invasive and even frightening. If your medical bills have been sent to collections by your hospital or doctor’s office, filing for bankruptcy will put an immediate stop to the unwanted calls and visits.
You’re Facing Lawsuits and Wage Garnishments
In some cases, hospitals and medical centers can file lawsuits against patients who have not paid their medical bills and take a percentage of their paycheck. This is known as wage garnishment. It happens when a judgment is placed on an individual, and the court demands that their employer send a portion of the paycheck to the hospital.
Your Insurance Denied Coverage
If you require expensive treatment or surgery or even an extended hospital stay, and your insurance denied full or partial coverage, then you should consider filing for bankruptcy. These bills can be overwhelming for the average American and can put them into financial distress because insurance refuses to help.
You’ve Exhausted All Other Options
There are some options you can explore to pay back your medical debt. These include negotiating with the medical provider, using charitable or financial repayment programs, or setting up a repayment plan. But in some cases, these aren’t applicable or even helpful, meaning bankruptcy is the only other option.
When Should You File Bankruptcy for Medical Bills?
The timing of when you file for bankruptcy due to medical debt is important. In some cases, the longer you wait to file for bankruptcy, the more debt you can have wiped away. For example, if you have been diagnosed and are prescribed treatment for the next six months, it would be a good idea to wait until the treatment has ended and you’ve collected all of the bills before filing for bankruptcy.
Why do we recommend that people wait? Because bankruptcy only discharges the debt you already have, not future debt. You can also only file for Chapter 7 bankruptcy every 8 years and Chapter 13 every 4 years.
However, if you are facing lawsuits and wage garnishment, then it’s best to act sooner rather than later. When you file for bankruptcy, it enacts an automatic stay. That means the wage garnishment stops and debt collectors disappear.
The best way to find out when you should file for medical bankruptcy is by talking to an experienced lawyer at A Bankruptcy Law Firm, LLC. We’ll review your case and advise the best way to move forward to ensure you get as much debt as possible discharged.
Pros and Cons of Filing Bankruptcy for Medical Bills
Filing for bankruptcy is nothing to take lightly. While there is a path to living debt-free at the end of the tunnel, there are other consequences to consider.
Pros of Filing for Bankruptcy for Medical Bills
- Debt Wiped Out (Chapter 7) – Most or all unsecured medical bills and debts can be completely discharged, meaning you no longer legally owe them.
- Automatic Stay – As soon as you file, all collections, lawsuits, wage garnishments, and harassing calls must stop immediately.
- Fresh Start – You can rebuild without the crushing weight of medical debt hanging over you
- No Repayment (Chapter 7) – You don’t have to pay anything back to hospitals or collectors if you qualify.
- Manageable Repayment (Chapter 13) – If you don’t qualify for Chapter 7, Chapter 13 sets up a structured 3-5 year plan you can afford.
- Protect Assets (in some cases) – Depending on exemptions in your state, you may keep your house, car, retirement accounts, and personal belongings.
- Emotional Relief – Ending collection calls and lawsuits often brings major stress relief.
Cons of Filing Bankruptcy for Medical Debt
- Credit Score Damage – Bankruptcy stays on your credit report for 7 years with Chapter 13 and 10 years with Chapter 7, and lowers your score.
- Future Credit Harder to Get – Loans, mortgages, and even renting an apartment can be more difficult or more expensive due to higher interest rates.
- Loss of Property (Chapter 7) – In some states, if you have non-exempt assets (like a second car, vacation home, or valuable jewelry), they may be sold to pay creditors.
- Not All Debts Discharged – Bankruptcy only clears unsecured debt (medical bills, credit cards, etc.) It doesn’t erase student loans (except in rare cases), child support, alimony, or most taxes.
- Limited Repeat Use – Since you can’t file again for several years, if new debts pile up, bankruptcy won’t be an immediate option again.
The bottom line is that bankruptcy can give you complete relief from unpayable medical debt, stop collections, and let you start on a clean slate. But the trade-off is some long-lasting credit consequences and loss of property, depending on your situation.
Do You Need a Lawyer to File Medical Bankruptcy?
While you don’t legally need a lawyer to file for Chapter 7 or Chapter 13 bankruptcy, it is an excellent idea to hire one.
Filing for bankruptcy is definitely not easy, especially if you do not have a legal background. It involves completing complex paperwork, meeting strict deadlines, court hearings, repayment plan approvals, and more.
In fact, most bankruptcy cases that are filed without a lawyer are dismissed. That means your debts aren’t discharged, and you’re stuck trying to repay them.
When you work with a bankruptcy lawyer, you’ll have a higher chance of getting your debt discharged and peace of mind knowing a legal professional who handles these cases daily is on your side.
Wipe Away Medical Debt with Help from A Bankruptcy Law Firm, LLC
It’s time to pull yourself up from the pile of overwhelming medical debt and talk to the lawyers at A Bankruptcy Law Firm, LLC about filing for bankruptcy.
We’ll review your financial situation and help you decide which chapter is the best solution for you. And with one flat rate for both Chapter 7 and Chapter 13 bankruptcy filing, you don’t have to worry about incurring legal costs on top of your lingering debt.
Our legal team is here to work on your behalf to discharge your debt so you can find relief once and for all. Contact us for a free consultation or call (800) 7-BENSON to discuss your bankruptcy filing today!
