The Bankruptcy Law Clinic Blog

Friday, September 12, 2014

Is Bankruptcy an Option if My Debt Includes Medical Bills?

The simple answer to this questions is, “Yes, you can declare bankruptcy if medical bills have caused you financial hardship.” As a matter of fact, many people have few financial issues until a medical emergency strikes.  The medical bills are what trigger their need for bankruptcy.  

If you have medical bills AND credit card debt, you include both in your bankruptcy filing.  You do not have the option to pick and choose which debts are included in your bankruptcy. All of the debts that fall under a similar classification will be included in the bankruptcy.  This means if you have credit card debt and you were able to keep up with the monthly payments (the cards are not behind or in default), but you are struggling with medical bills, it will still all be included in the bankruptcy.

The goal of bankruptcy is to help you get a handle on your finances, while also helping your creditors receive the money they are due.  In many cases, creditors receive just a portion of the total amount owed, but they must be treated fairly across the board.  One creditor cannot receive a better payment arrangement than another when it comes to a debtor’s bankruptcy.  No creditor, including any debts you have to friends and family, can receive what in bankruptcy code is known as “preference.”

Medical bills and credit card debt, as well as some tax debts and personal loans, are “general unsecured debts.” This means that under bankruptcy law, they must all be treated in the same manner.  In the end, when you file for bankruptcy, all of these general unsecured debts must be included in your bankruptcy.

Bankruptcy can be a very effective tool for helping those with medical debt.  An experienced bankruptcy expert can help you evaluate your specific circumstances.

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