Medical emergencies and health conditions can come out of nowhere, meaning medical bills can quickly become overwhelming, even for those with insurance. Many families in Florida struggle with debt due to unexpected medical expenses. Despite years of hard work and prudent financial planning, one medical emergency is sometimes enough to jeopardize a family’s future. For those facing insurmountable medical debt, bankruptcy can offer a way out – and it may be precisely what you need to rebuild your life and reset your finances.
Medical Debt and Bankruptcy
Medical debt is one of the leading causes of financial distress in the United States, and Florida is no different. Millions and millions of American adults struggle with some form of medical debt, with many of those debts exceeding $10,000. In many cases, Florida residents burdened by high medical costs are blameless, as even those with insurance can be stuck with debts when faced with emergencies, chronic conditions, or major surgeries.
There are two primary types of bankruptcy that can help with medical debt: Chapter 7 and Chapter 13. Chapter 7 bankruptcy requires liquidating assets to discharge most debts, including medical bills. This process typically takes a few months and can provide a fresh start by wiping out qualifying debts.
- If someone has limited income potential and cannot keep up with accruing debts, Chapter 7 can help them get their financial status under control.
- Chapter 13 bankruptcy, on the other hand, does not wipe all debts from your name. Instead, it allows debts to be repackaged into a manageable repayment plan over three to five years. It can be a suitable choice for anyone who wants to avoid liquidation and can feasibly repay what they owe, albeit not as quickly as they could without bankruptcy.
- Chapter 7 bankruptcy is means-tested, so eligibility requires comparing your income to the median household income in Florida. As of 2023, the median income for a household in Florida is roughly $65,000. If your income is below this threshold, you may qualify for Chapter 7. If not, Chapter 13 is an alternative, assuming your regular income is enough to support the repayment plan. If you are unsure what you qualify for or the best way to overcome your medical debts, a consultation with experienced bankruptcy attorneys can answer your questions.
Questions About Debt Related to Medical Issues
Can I include medical debt incurred after filing for bankruptcy? Bankruptcy only helps with debts associated with your name before you file for bankruptcy. Any new medical debt incurred after filing will not be covered. This may seem limiting, but keeping up with new payments can be easier because you no longer have to use funds to pay down old debts. Your attorney can provide greater clarity on how to handle new medical debts while your bankruptcy case is active. Bankruptcies aren’t always focused on court processes alone. For example, you may be able to negotiate to temporarily pause payments for ongoing medical procedures until after your bankruptcy.
Will bankruptcy affect my ability to receive future medical treatment? Filing for bankruptcy should not impact your ability to receive medical treatment. However, some healthcare providers may hesitate to offer non-emergency services on credit if you have a bankruptcy record. After bankruptcy, you still have plenty of opportunities to rebuild credit and once again obtain positive financial status in the eyes of lenders. Rest assured, you will never be denied medical treatment in the case of emergencies that require immediate assistance.
How does bankruptcy impact co-signed medical debts? If a family member or friend co-signed for your medical debt, filing for bankruptcy will affect them. In Chapter 7 bankruptcy, the co-signer remains responsible for the debt even if it is discharged for the primary borrower. In Chapter 13 bankruptcy, the co-signed debt can be included in the repayment plan, offering some relief to the co-signer and yourself. Multiple names attached to debts will make the process more complex, so discussing strategies with an attorney can help protect both parties involved and minimize the financial impact on your co-signer.
Medical debts can be risky, as mixing your family’s personal health with late payments and debt often causes stress and uncertainty. If medical bills are causing issues in your life, contact Richard V. Ellis. During your initial consultation, our team can answer any questions you have concerning bankruptcy and how it can make a difference in your finances and future.
