You Can Eliminate Medical Bills in Bankruptcy
Medical bills generally represent unsecured debt. Unsecured debt does not have property “securing” the debt itself, meaning that in the event of default the creditor cannot seize and sell the specific piece of property which “secures” the debt. Unsecured debt is generally discharged in chapter 7 bankruptcy. Once a debt is discharged the debtor no longer legally owes the debt, and the creditor is prohibited by the discharge injunction from collecting on the debt ever again. However, some unsecured debts are not dischargeable in bankruptcy. Specifically, student loans are generally not dischargeable in chapter 7 bankruptcy, as are recent tax obligations. Fraudulently incurred debts are also nondischargeable in bankruptcy, but where medical bills are concerned there are few obstacles to discharge.
While medical bills are easily dischargeable in chapter 7 bankruptcy you might not be able to eliminate 100% of your medical bills in chapter 13 bankruptcy. Whether you can entirely or only partially eliminate your medical bills in chapter 13 bankruptcy will depend upon your disposable income. If you have no disposable income then you may propose a chapter 13 plan which pays your general unsecured creditors nothing. This zero percent plan will only require payment of the attorney’s fees and required secured and priority debts and pay nothing or less than 1% to general unsecured creditors. Since your medical bills will be included with other general unsecured debt you will be able to effectively eliminate your medical bills in chapter 13 bankruptcy when you can confirm a zero percent plan like the one mentioned above. If you propose to pay general unsecured creditors a certain percentage then you will be able to partially eliminate the difference in your outstanding medical bills.