Can I File Bankruptcy for Medical Bills?
New Jersey Bankruptcy Attorneys Explain Medical Debt Relief
Unexpected medical bills can put a serious strain on your finances, even if you have health insurance. An accident or sudden illness could mean that you suddenly face tens of thousands in medical debt to a hospital, doctor or other healthcare organization. For many, this kind of debt can quickly become overwhelming. Fortunately, you can clear most medical debt by filing either Chapter 7 bankruptcy or Chapter 13 bankruptcy.
The New Jersey bankruptcy attorneys at Garland & Mason, L.L.C. have been assisting clients in finding debt relief for more than 25 years. If you are struggling with unpaid medical bills or other debts, we can advise you on whether filing bankruptcy can help your situation. We can also offer bankruptcy alternatives like debt consolidation. We offer free consultations and represent clients from throughout Monmouth, Mercer, Ocean and Middlesex Counties as well as across New Jersey.
Are Medical Bills Dischargeable in Bankruptcy?
While there is no such thing as a “medical bankruptcy” to discharge only your healthcare bills, you can include your medical debt in a regular Chapter 7 or Chapter 13 bankruptcy. Under bankruptcy law, medical bills are a type of unsecured debt. This means that, like credit card balances, you can usually discharge your hospital and health-related bills when filing bankruptcy.
If you qualify for Chapter 7 bankruptcy, you can eliminate your unsecured debt, including hospital and medical bills. When you file Chapter 7, your nonexempt assets are liquidated, and the proceeds are distributed to your creditors by a bankruptcy trustee. (Many people who file Chapter 7 can exempt all their assets.) Medical debts are classified as nonpriority unsecured debts, which are the last to be paid. Often, this means that the hospital or other creditor may receive no payments at all. Nevertheless, you will receive a discharge of all unsecured debt at the end of the bankruptcy process. This means that you will not have to pay any of your remaining medical bills.
Chapter 7 bankruptcy is usually best for those with low incomes and few assets. However, tens of thousands in medical bills can strain any budget. If you have a steady income and meet other requirements, Chapter 13 bankruptcy may be a better choice for you. In Chapter 13, you establish a three to five-year repayment plan. This allows you pay a portion of your unsecured debts, including medical debt, as well as get or stay current on secured debt payments, like your mortgage. At the end of this repayment period, you will be eligible to receive a discharge for remaining unsecured debts, like medical bills.
What Happens If I Have a Lien Against My Property for Medical Debts?
Unpaid or overdue medical bills are usually dischargeable through bankruptcy. However, the situation is more complicated if a creditor has placed a lien against your property for medical debt. A lien is a claim on your property. In New Jersey, a lien can only apply to real estate, such as your house. If you fall far enough behind on payments, a hospital, insurance company or other creditor may be able to obtain a money judgment against you in court. They can then apply this judgment as lien.
Unlike most medical debt, a lien is defined as a secured debt by bankruptcy law. This means that the bankruptcy process cannot discharge liens. Instead, you must pay the full value of the lien or surrender the property to satisfy the debt. However, by getting rid of other debt, you will be in a better position to pay the lien.
Questions on Medical Debt? Contact Our New Jersey Bankruptcy Attorneys
If you face overwhelming medical bills, our New Jersey bankruptcy attorneys can help you find debt relief. In many cases, filing bankruptcy can help you remove your medical debt completely. If you have a medical or hospital lien on your property, bankruptcy or another alternative may be of use. Contact us online or call our Manalapan law office to schedule your free initial consultation today.