Medical Debt After Filing Chapter 7 Bankruptcy

One of the largest growing debt concerns across America today is medical debt. Medical insurance and medical care are both continually rising, and with average incomes not keeping pace with the rising costs, there should be no wonder a widening problem is beginning to develop over medical debt.


Medical Debt

One of the ways people are dealing with the rise in medical costs is to file for bankruptcy protection. It is not uncommon now to see medical bills after you have been in a hospital for a serious illness to run over a $100,000. If you do not have medical insurance or insurance that is adequate to pay the bill, the medical debt can become overwhelming to the average income producer.

Seniors, on limited income, seem to be the hardest hit group when it comes medical debt. They are the most likely to have a serious illness.

Medical Debt and How Some Hospitals are Handling it Today

Today, hospitals are just as strapped for money as the next business entity. With almost 25% of the hospitals in the United States now working as “for profit” hospitals and the number growing, it is no wonder that collection attempts to cover the rising costs of operating the hospitals is also growing.

In the past, hospitals were prone to forgive the large medical debt for those who could not afford to pay, but this practice is dwindling, even amongst community and non-profit hospitals. Collection agencies are fast becoming the benefactors of the dilemma.

Medical Debt and Filing Bankruptcy

The only way some debtors who own medical debt can deal with the problem of the debt is to file for bankruptcy protection. Since a chapter 7 bankruptcy is the most common bankruptcy individuals file, and since a chapter 7 bankruptcy completely discharges medical debt, most medical debt that is eliminated in bankruptcy is done so through a chapter 7.

A problem for medical debt holders who want to file bankruptcy to eliminate the burden of their debt is in determining when to file. Once you file for a chapter 7 bankruptcy and receive a discharge, bankruptcy laws will not allow you to receive another chapter 7 bankruptcy discharge until eight years has passed.

So, if you are not over your illness and you file for bankruptcy, medical debt will continue to accumulate after your bankruptcy discharge. The same applies if you get sick again after filing and incur new medical debt within the eight year period. Collectors can come after you for the medical debt without impunity during the eight years after receiving a chapter 7 bankruptcy discharge.

One alternative after filing a chapter 7 bankruptcy to discharge medical debt is to file a Chapter 13 four years later. You can do this if you qualify for filing a chapter 13.

Medical debt is a problem for all of society, especially those who are experiencing illness and have low incomes. Filing for bankruptcy protection is just one way of handling medical debt and should be thoroughly discussed with a bankruptcy attorney before filing.

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