The high cost of healthcare, coupled with unexpected medical emergencies, can quickly lead to overwhelming debt. Filing for bankruptcy may provide relief and a fresh start if you’re struggling with medical debt. When you understand how medical debt is handled during bankruptcy in Clark County, you can take specific steps to managing medical debt throughout the bankruptcy process.
Understanding Medical Debt in Bankruptcy
Medical debt is considered an unsecured debt and is generally dischargeable in bankruptcy. Unsecured debts don’t have collateral tied to them, so they can be discharged when your bankruptcy is approved. How much of your medical debt can be discharged depends on whether you file for Chapter 7 or Chapter 13 bankruptcy.
In Chapter 7 bankruptcy, medical debt can be eliminated completely, providing you with a fresh start. Chapter 7 bankruptcy is often referred to as “liquidation” bankruptcy, where non-exempt assets are sold to repay creditors. However, certain exemptions exist to protect essential assets, such as your home and vehicle, which vary by state. Consulting with a bankruptcy attorney in Clark County will help you understand the exemptions specific to your situation.
In Chapter 13 bankruptcy, you may be required to repay a portion of your medical debt through a court-approved repayment plan. Chapter 13 bankruptcy is commonly known as “reorganization” bankruptcy, where you propose a repayment plan to gradually repay your debts over a period of three to five years. The repayment plan takes into account your income, expenses, and the amount of debt owed. A bankruptcy attorney in Clark County can help you create a feasible repayment plan that is acceptable to the court.
Steps to Manage Your Medical Debt During Bankruptcy
- Gather and organize your medical bills. Start by collecting all your medical bills and associated documentation, including insurance statements, and any correspondence related to your medical treatment. Organize these documents chronologically or by provider so you can have a clear, accurate understanding of the total amount you owe. This comprehensive record of your medical debt will be essential your bankruptcy petition.
- Consult a bankruptcy attorney. Get professional guidance from a qualified bankruptcy lawyer in Clark County, who will be familiar with the specific regulations and procedures in the area. Your attorney will review your financial situation, including your medical debt; help you understand your options; and guide you through the bankruptcy process. They’ll help you prepare your necessary paperwork, represent you during court proceedings, and negotiate with creditors on your behalf.
- Explore non-bankruptcy options. Before you decide to file for bankruptcy, it’s worth exploring alternative options to manage your medical debt. Start by contacting your healthcare providers or the collection agencies handling your debt to try to negotiate for reduced payment plans, settlements, or extended payment terms. Some hospitals and clinics offer financial assistance programs or charity care for individuals who meet certain criteria. Exploring these options can help reduce the amount of medical debt you need to include in your bankruptcy filing.
- Determine your eligibility for bankruptcy. To file for bankruptcy, you must meet certain eligibility requirements. You’re usually required to have a means test to determine your eligibility for Chapter 7 or Chapter 13 bankruptcy. The means test evaluates your income and financial situation to determine if you have sufficient disposable income to repay your debts, including your medical debts. Your bankruptcy attorney will assist you in completing the means test accurately and determining which bankruptcy chapter is appropriate for your circumstances.
- Leverage your automatic stay protection. Once you file for bankruptcy, an automatic stay goes into effect that prohibits creditors, including medical providers, from pursuing collection actions against you. That means no lawsuits, wage garnishments, and harassing phone calls related to your medical debt. It provides a temporary reprieve and allows you to focus on navigating the bankruptcy process without the constant stress of collection activities.
- List your medical debt in your bankruptcy petition. It’s essential that you disclose all your medical debt in your bankruptcy petition accurately, including details about each medical provider, the amount owed, and any outstanding balances. Failure to include any medical debts may result in those debts not being discharged. The bankruptcy attorney who helps you prepare the petition should ensure that all your medical debts are properly included.
- Attend mandatory credit counseling. As part of the bankruptcy process, you must complete a credit counseling course from an approved agency. This course provides financial education and guidance to help you make informed decisions about your debts and future financial management. The credit counseling course is usually required before you can file for bankruptcy, and it must be completed within a specific timeframe. Your bankruptcy attorney can provide you with a list of approved credit counseling agencies in Clark County.
- Attend the meeting of creditors. After you file for bankruptcy, you’ll be required to attend a meeting of creditors (also known as a 341 meeting). This meeting is presided over by a bankruptcy trustee and allows creditors to ask you questions about your financial situation, including your medical debts. Your bankruptcy attorney will accompany you to the meeting to guide you through the process, and you should be prepared to provide honest and accurate responses to questions.
- Follow court orders and repayment plans. If you file for Chapter 13 bankruptcy, the court will approve a repayment plan that includes the repayment of a portion of your debts, including your medical debt. The repayment plan takes into account your income, expenses, and the amount of debt owed. It’s critical that you adhere to the plan and make timely payments to ensure a successful bankruptcy outcome. If you fail to do so, your case may be dismissed and you may lose your bankruptcy protection.
Get in Touch With Richard P. Arthur
Richard P. Arthur, Attorney at Law, can provide advice on how to handle your medical debt as part of your bankruptcy filing. You can call 937-254-3738 for a consultation. He has more than three decades of experience helping clients in Dayton and Trotwood, as well as Montgomery, Greene, Miami, Clark, and Warren counties.