What Medical Bills Can You Get Rid of With Bankruptcy?

 Posted on February 20, 2025 in Medical Debt

Medical debt is one of the most common reasons people consider bankruptcy. Whether from an unexpected hospital stay, an emergency surgery, or long-term medical treatment, medical bills can quickly overwhelm even the most responsible people.

If you are struggling with unpaid medical bills, you may be wondering: Does bankruptcy cover medical bills? Can you file bankruptcy on medical bills in Texas? The short answer is yes, bankruptcy can often help eliminate medical debt, but the process depends on your financial situation and the type of bankruptcy you qualify for.

Understanding how medical debt is treated in bankruptcy and what happens if you do not pay can help you make informed decisions about your financial future, and our Texas bankruptcy lawyer is here to help.

Can You File Bankruptcy for Medical Bills in Texas?

Medical debt is considered unsecured debt, meaning it is not backed by collateral like a house or car. In both Chapter 7 and Chapter 13 bankruptcy, medical bills can be discharged, meaning you are no longer legally required to pay them.

However, the type of bankruptcy you qualify for matters. Chapter 7 bankruptcy is a quicker process that can eliminate medical debt entirely if you meet the income requirements. However, it may require you to liquidate non-exempt assets.

On the other hand, Chapter 13 bankruptcy allows you to reorganize medical debt into a repayment plan over three to five years. This option is useful if you earn too much to qualify for Chapter 7 or want to protect assets from being sold to pay your debt.

The important thing to know is that both types of bankruptcy stop collections, lawsuits, and wage garnishments immediately through the automatic stay, giving you relief from creditor harassment.

Do You Lose Your Home if You File for Bankruptcy for Medical Bills? 

Texas has some of the strongest bankruptcy exemptions in the country, allowing people to protect more assets from creditors than in many other states. For example, under the right circumstances, Texas has an unlimited homestead exemption, meaning your primary home cannot be taken to satisfy medical debts or bankruptcy settlements (as long as it meets certain acreage limits and you have owned it for a certain amount of time). This differs from other states, where the homestead exemption may be capped at a specific dollar amount.

What Happens to Medical Debt When a Spouse Dies?

Another common concern is whether a surviving spouse is responsible for paying medical bills after his or her spouse passes away. In Texas, the answer depends on whether the medical debt was considered a community debt and whether the deceased spouse’s estate has assets to cover those bills.

Since Texas follows community property laws, medical debt taken on during a marriage is generally considered to be shared by both spouses. This means that if a husband or wife has significant medical bills before passing away, the surviving spouse may still be responsible for those debts, even if that spouse’s name was not on the bills. In such cases, bankruptcy could be an option for the surviving spouse to eliminate overwhelming medical bills.

What Happens if I Do Not Pay My Medical Bills? 

If medical debt is not paid or discharged through bankruptcy, creditors and collection agencies can take legal action against you. Some of the worst-case scenarios for unpaid medical bills include:

• Debt Collection Harassment: Creditors can call you over and over, send demand letters, and report the unpaid debt to credit bureaus, sometimes lowering your credit score by a lot.
• Lawsuits and Judgments: If a medical provider or collection agency sues you, the court may issue a judgment forcing you to pay the debt.
• Wage Garnishment: In Texas, wage garnishment for medical debt is not allowed, but if you move to another state, creditors may be able to garnish wages.
• Bank Account Seizures and Liens: While Texas protects a primary residence from medical debt creditors, bank accounts can be frozen, and in some cases, non-homestead property may be at risk.

Filing for bankruptcy before legal action is taken can stop these consequences and give you a fresh financial start.

Does Medical Debt Go Away After Bankruptcy?

If you successfully complete Chapter 7 bankruptcy, all eligible medical debt is completely eliminated. You will not owe anything, and creditors cannot legally pursue collection.

In Chapter 13 bankruptcy, your medical bills may be partially or fully repaid through your court-approved repayment plan. Any remaining medical debt not covered by the plan will be discharged at the end of the repayment period.

However, any medical bills for care you get after filing for bankruptcy will not be discharged. If you continue to need costly medical care, bankruptcy does not prevent new medical debt from accumulating.

Secured Medical Debts and Personal Injury Settlements in Bankruptcy

Most medical bills are unsecured and can be wiped out in bankruptcy, but there are some exceptions:

Secured Medical Debts

If you financed expensive medical equipment, such as a wheelchair or hospital bed, the lender may have placed a lien on the equipment. In this case, in Chapter 7 bankruptcy, you must either return the equipment or continue making payments if you want to keep it. In Chapter 13 bankruptcy, you may be able to negotiate lower payments or reduce the total amount owed.

Medical Liens from Personal Injury Cases

If your medical bills were paid through a personal injury settlement, your medical provider may have placed a medical lien on those funds. Bankruptcy does not eliminate the obligation to pay medical creditors from settlement funds. An experienced bankruptcy attorney can review your debts and help you understand which ones can be discharged and which may require special handling.

Do I Need a Lawyer to File for Bankruptcy? 

Filing for bankruptcy is a complex legal process, and making mistakes can make it much harder to get rid of medical debt. An attorney can help you:

• Determine if Chapter 7 or Chapter 13 is best for your situation based on your income and assets.
• Stop aggressive medical debt collections by filing for bankruptcy and triggering the automatic stay.
• Negotiate secured medical debt to reduce payments or protect necessary medical equipment.
• Navigate exemptions under Texas bankruptcy law to protect your home, car, and other assets.
• Make sure all required bankruptcy documents are filed to avoid delays or rejections in court.

If you are facing overwhelming medical bills, speaking with a bankruptcy lawyer can help you understand your rights and develop a plan to regain financial stability.

Contact a San Antonio, TX Bankruptcy Attorney for a Free Consultation

If you are struggling with medical debt and wondering if bankruptcy covers medical bills, the Law Offices of Chance M. McGhee can help. As the Director of the San Antonio Bankruptcy Bar Association, Attorney McGhee has extensive experience helping Texas residents eliminate medical debt and regain financial stability.

Our firm offers free consultations to discuss your options and determine the best path forward. Do not wait until medical creditors take legal action – call our Schertz, TX bankruptcy lawyer today at 210-342-3400 and take the first step toward financial relief.