Can You File Bankruptcy on Medical Bills?
Medical debt is one of the leading causes of financial hardship in the United States. Even with insurance, unexpected hospital stays, surgeries, or ongoing treatments can leave patients with overwhelming bills. If you’re drowning in medical debt, you may be wondering: Can you file bankruptcy on medical bills? The short answer is yes—but it’s important to understand how it works and what your options are.
Medical Debt and Bankruptcy
Medical bills are considered unsecured debt, similar to credit cards or personal loans. This means they are not tied to collateral, like a house or car. Because of this, they can typically be discharged through bankruptcy, giving you relief from overwhelming financial pressure.
When you file for bankruptcy, your debts are grouped together and addressed according to the type of bankruptcy you pursue. Let’s look at the two most common types for individuals: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy and Medical Bills
Chapter 7 is often called “liquidation bankruptcy.” It allows for the discharge of most unsecured debts, including medical bills. Once your case is approved, you are no longer legally required to pay those debts.
To qualify for Chapter 7, you must pass a means test, which looks at your income and financial situation. If approved, this process is relatively quick—typically lasting just a few months. However, some of your non-exempt assets may be sold to pay creditors. Many people find that most of their essential property, like a primary vehicle or household items, is protected under exemption laws.
Chapter 13 Bankruptcy and Medical Bills
Chapter 13 works differently. Instead of wiping out debt immediately, it sets up a repayment plan lasting three to five years. Your medical bills are included along with other unsecured debts, and you make affordable monthly payments based on your income. At the end of the repayment period, any remaining eligible debt may be discharged.
Chapter 13 is often a better fit for individuals who have steady income but need help managing large debts, or for those who do not qualify for Chapter 7.
The Impact on Credit and Future Finances
Filing for bankruptcy does have consequences, including a negative impact on your credit score. Chapter 7 bankruptcy can remain on your credit report for up to 10 years, while Chapter 13 stays for 7 years. However, many people find that the relief of eliminating crushing medical debt outweighs the temporary credit setback. In fact, bankruptcy can often give you a fresh start, making it possible to rebuild your credit over time.
Alternatives to Bankruptcy
Before filing, it’s worth exploring alternatives such as:
- Negotiating with the hospital or provider for a reduced bill.
- Setting up a payment plan with lower monthly installments.
- Seeking financial assistance programs or charity care.
While these options may not work for everyone, they can sometimes provide relief without the long-term effects of bankruptcy.
Final Thoughts
Yes, you can file bankruptcy on medical bills, and for many people, it provides the financial reset they desperately need. Whether Chapter 7 or Chapter 13 is right for you depends on your income, assets, and long-term goals. Because bankruptcy is a major decision, it’s always best to consult with a qualified bankruptcy attorney who can help you understand your options and guide you toward the best solution for your situation.
