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Declaring Bankruptcy On Medical Bills: Is It Possible?


As soon as the COVID-19 pandemic hit America, many Americans lost their jobs, and, unfortunately, the loss of jobs came with the loss of health insurance coverage. Because of the loss of health insurance coverage, medical debt began piling up. According to a USA Today article, by September 2020, medical debt had risen slightly over 3% from when the pandemic started.

Affected individuals have had to use their savings to cater for their medical expenses, but even savings get depleted. Many people are now worried about how to survive. If you lost your health insurance after being laid off because of the pandemic and are struggling with overwhelming medical debt, bankruptcy could be the solution to your problems.

Medical issues such as medical bills are a leading cause of bankruptcy in America. According to a study published in the American Journal of Public Health, 66.5% of all bankruptcies in America were tied to medical issues. The findings show that 530,000 families in America file bankruptcy every year because of medical issues. Additionally, research suggests that the Affordable Care Act has not reduced the proportion of bankruptcies motivated by medical problems.

Can You Discharge Medical Debt in Bankruptcy?

You can discharge medical debt in bankruptcy, but, generally, not as a standalone option. In short, there is no such thing as “medical bankruptcy.”

Bankruptcy laws have been designed in such a way that they are fair to both debtors and creditors. Because of that, once you begin the bankruptcy process, you’ll need to list all the debts you’d wish to include in your bankruptcy case. After doing that, the bankruptcy trustee will review your bankruptcy case; thereafter, you will find out which debts you can discharge and which you cannot discharge. Medical debt is considered an unsecured non-priority debt in bankruptcy. In a Chapter 7 bankruptcy, most, if not all, of such debt is discharged. On the other hand, in a Chapter 13 bankruptcy, people usually pay a small amount of their unsecured non-priority debts. Other types of unsecured non-priority debts include;

  • credit debts
  • utility bills
  • personal loans

Nonetheless, it is vital for you to note that if medical debt is the only debt you have and wish to discharge in bankruptcy, you might still be able to discharge it.

Which Bankruptcy Option Should You Use When Eliminating Medical Bills?

The two most commonly filed types of bankruptcies in Iowa are Chapter 7 and Chapter 13. The bankruptcy option you go for will depend entirely on your situation and whether you meet the set qualifications. For instance, to qualify for Chapter 7 bankruptcy, you’ll need to pass the means test and to be eligible for Chapter 13 bankruptcy, you need a regular income.

If you cannot afford to repay your debts, Chapter 7 bankruptcy would work best for you since this bankruptcy option takes away a debtor’s responsibility to pay a debt once the debt is discharged. However, if you don’t qualify for Chapter 7 bankruptcy, you could consider Chapter 13 bankruptcy, which focuses on rearranging a debtor’s debts and making debt repayment more manageable.

Contact a Southeast Iowa Bankruptcy Lawyer Today

If you are in or around Iowa and are struggling with overwhelming medical debt, consult a qualified bankruptcy attorney who can help you evaluate your options. Contact a Southeast Iowa bankruptcy attorney to learn if or how you can discharge your medical debt in bankruptcy or about the other options you have.


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