Is Medical Bankruptcy an Option?

Medical bankruptcy actually does not exist in the United States, though a growing number of people are filing bankruptcy due to healthcare costs that exceed their abilities to pay. When you ask officials with your local courts for debt relief, you must include other types of bills such as credit card accounts and even overdue day care expenses.

The most common type of bankruptcy is Chapter 7; this is often an appealing option when health problems have caused a job loss and overwhelming medical bills have come through that just cannot be paid. However, you must economically qualify to file for Chapter 7. Generally, you should earn no more than your state's annual median income level. As of 2013, the annual median income figure for a single California resident was $48,415, while the yearly level for a family of four living in Arkansas was $56,591, according to the United States Census Bureau.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 drastically altered the potential number of people who can file Chapter 7. People who earn more than their state's annual median income level can try to get a court official's permission to file Chapter 7, but they must be able to prove that they cannot fairly repay their creditors while covering household expenses. Otherwise, debtors are encouraged to request partial relief under Chapter 13 or to forego bankruptcy as an option.

Medical bills are usually reduced or even eliminated even in a Chapter 13 cases. The debtor partially repays creditors under court supervision over a three-to-five-year time period. People who file Chapter 13 rather than Chapter 7 cannot legally get new credit without a judge's permission while they are repaying their creditors. However, once a judge finalizes a Chapter 7 case the debtor can go immediately get new credit accounts if he so chooses.

Medical bankruptcy when it comes to student loans could in rare cases be a more accurate term. BAPCPA made it much harder for debtors to discharge their government-issued student loans through bankruptcy. But people with serious and permanent disabilities or illnesses potentially qualify for student loan relief under federal bankruptcy laws. You must petition your judge for this privilege and have a fairly compelling case.

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