What Happens to Medical Debt With Bankruptcy in Texas

 Posted on October 19, 2023 in Medical Debt

As the medical debt piles up, bankruptcy may seem like your only option. But how do medical bills get handled in bankruptcy? It depends on the chapter you file. Understanding the nuances allows the strategic use of bankruptcy to find relief. A Texas lawyer can help you determine if this is the best option for you and how it can affect your situation.

Navigating Medical Debt in Chapter 7

Chapter 7 bankruptcy fully discharges many unsecured debts, including medical bills, credit cards, personal loans, and similar loans. Discharge legally eliminates your obligation to pay. However, not all medical debt can be discharged. Bills owed to government entities like Medicare are considered priority debts and remain payable. Ongoing obligations like child support also still must be paid. Before filing Chapter 7, categorize your medical debts to understand which could be erased so you can evaluate if liquidation bankruptcy suits your situation. An attorney can help thoroughly assess discharge-ability.

Managing Medical Debt in Chapter 13

Rather than full discharge, Chapter 13 bankruptcy uses 3-5 year debt repayment plans. You pay disposable income toward outstanding debts until repaid. Medical bills are handled like other unsecured debts in Chapter 13. Your repayment plan covers a percentage of the total debts based on what you can afford.

The timeline matters, however. Pre-bankruptcy medical debt is handled through your plan, while new medical debt accumulated post-filing is not included. This provides relief from old medical bills while giving you a fresh start on new obligations as they arise. An attorney can help determine if a Chapter 13 payment plan fits your scenario.

Other Bankruptcy Impacts on Medical Debts

Beyond discharging existing bills, bankruptcy also halts further collection of medical debts through the automatic stay imposed when filing. Public bankruptcy records on your credit report also alert providers that aggressively pursuing payment for recent medical treatment could violate restrictions. You regain leverage in negotiating current bills. Make sure to be cautious of continuing healthcare needs. While old debts may be discharged, bankruptcy does not eliminate the need for ongoing care. Be realistic when budgeting so future medical costs do not negate bankruptcy relief.

Contact a Kerrville, TX Bankruptcy Lawyer

Strategic bankruptcy filings can provide options for finding relief from otherwise crushing medical debts. Work with a Schertz, TX bankruptcy attorney to understand the possibilities you may have. Your situation could look different than someone else’s. Call Law Offices of Chance M. McGhee at 210-342-3400 for a free consultation to see how the process could work for you.