Medical Debt Bankruptcymichael2022-10-26T22:28:59+00:00
Medical Debt Bankruptcy in Arizona
If you’ve ever experienced a serious illness or injury, you probably know just how expensive it can be to receive proper medical treatment. This can be said whether or not you have health insurance coverage to help with your medical expenses. So what can you do if you are left with unmanageable debt after a medical emergency? Bankruptcy is available as a safety net to those who qualify under Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Contact our Phoenix Bankruptcy Lawyers to learn more about how to wipe away Medical Debt and Doctor’s Bills through filing bankruptcy in Phoenix.
When filing bankruptcy due to medical debts, many people refer to this as a “medical bankruptcy.” However, there is technically no such thing as a “medical bankruptcy.” Even if your debt strictly stems from an illness or injury, you will still need to file a standard Chapter 7 or Chapter 13. All of your debts will be included in your bankruptcy, even if you file for medical reasons. This is to ensure fairness to both debtors and creditors.
Is Medical Debt Dischargeable in Bankruptcy?
Medical debt is generally unsecured debt. In a bankruptcy context, this means it is the same as credit cards, unpaid utility bills, repossession deficiencies, and personal loans. That means if you have any of these types of debts and file bankruptcy to discharge medical debt, the rest of your unsecured debts will be categorized and treated the same way. They will be liquidated and discharged in a Chapter 7 bankruptcy, and paid in the lowest tier of debts in a Chapter 13 payment plan.
As convenient as it would be, you can’t pick and choose the debts you include in your bankruptcy. You must list all of your debts, real estate, and personal property in your bankruptcy petition. You will also need to list your household income and all of your family’s expenses. This is true whether or not your spouse files bankruptcy with you. Other personal information must be included, like marital status, recent property transfers, impending settlements or inheritances, and more.
There are two main forms of consumer bankruptcy– Chapter 7 and Chapter 13. They will stay on your credit for ten and seven years, respectively. You will also be disqualified from FHA loans for 2 years after filing either chapter. However, you should be able to finance assets and open new credit cards shortly after your bankruptcy.
Medical bankruptcies aren’t uncommon. Between 20-50% of consumer bankruptcies at least partially stem from a medical emergency. Other important life events like divorce, unemployment, natural disasters, and more, can combine with a medical emergency to exacerbate the situation even further. Typically, someone will have at least a few thousand dollars worth of debt from multiple medical providers before turning to bankruptcy to manage these debts.
Some doctors are more patient than others when waiting for payment. Whenever you let an unpaid balance with a doctor stand, you run the risk of that doctor eventually pursuing collection. Your medical provider could pursue a judgment against you for an unpaid balance, which will have a negative impact on your credit. Your creditor can then use that judgment to obtain a levy on your tax returns or bank account, garnish your wages, and more. Filing Chapter 7 or Chapter 13 bankruptcy first allows you to avoid tarnishing your credit history with creditor judgments.
If your debts have been sold to debt collectors, your phone probably rings constantly with attempts at collection. Your creditors must stop harassing you when your case has been filed and the automatic stay is active. They must also stop contacting you as soon as you retain a bankruptcy attorney and inform them. Continued harassment could result in legal sanctions and fines for your creditor.
Depending on the structure of your medical debt, among other factors, there may be other ways to address your situation besides bankruptcy. Fortunately, medical providers are often less aggressive in collection methods than other creditors. You may be able to negotiate with your doctor to pay a reduced amount. Debt settlement could be available to you as an option. If your debts are primarily from a hospital, check if you qualify for your hospital’s financial hardship program. You may be able to have some or all of your hospital bill forgiven, based on your income.
One issue with filing bankruptcy to deal with unpaid bills is that your provider may choose to discontinue services if you discharge their debt. This isn’t the case with every doctor, but you must be aware of the risk if you plan to file bankruptcy. Some doctors will understand your situation and continue to treat you after discharging debts, while others won’t. If you live in a populated area with several doctor’s offices, this probably isn’t a huge concern for you. However, if you live in a more remote area, or you have a condition that requires specialized treatment, remaining with your current doctor could be highly important to you. If you are in this type of situation, you may want to consider filing Chapter 13, even if you qualify for Chapter 7 bankruptcy. Your doctor will be more likely to continue seeing you if you pay off your bill in a bankruptcy payment plan. You may also choose to pay off your balance after discharge, despite your legal responsibility to pay having been wiped away.
Keep in mind that filing bankruptcy won’t affect your ability to visit an emergency room. Emergency rooms are legally required to treat patients despite a former bankruptcy filing.
Many people are intimidated by the cost of hiring an attorney and filing bankruptcy in general. As intimidating as it can be, filing self-represented often isn’t worth the risk- especially in a Chapter 13 bankruptcy. If your case is dismissed, you will lose the protections of the Automatic Stay, allowing garnishments, foreclosures, and repossessions to resume. This can make it more difficult to get re-filed, and your protections from the Automatic Stay may be reduced due to multiple filings. However, many bankruptcy attorneys offer payment options to help you afford bankruptcy.
The option most attorneys offer is payment up front. This ensures that the attorney will be paid for their work, and that the client doesn’t have any fees to resolve after bankruptcy. It also guarantees that the attorney won’t need to pay out of pocket for your filing fees should you fail to make post-filing payments. You will most likely have the option to pay your up-front balance in installment payments. This is usually an attorney’s most affordable payment option.
If paying your fees up front is infeasible, your bankruptcy attorney may offer a post-filing payment plan. Depending on your income and the chapter you seek to file, you could be filed with little to no money down. You should confirm with your attorney whether or not your filing fees will be included in your payment plan, as some may offer payment plans for legal fees, but require you to pay your filing fees up front. The filing fees for a Chapter 7 bankruptcy are $338. For a Chapter 13 bankruptcy, the filing fees are $313.
In a Chapter 13 bankruptcy, your legal fees will be worked into your payment plan. In a Chapter 7, your case must be bifurcated in order to pay your fees after filing. This means your case will first be filed as a skeleton petition. This “bare bones” petition only includes basic contact information, your income information, and your creditor mailing matrix. Once that petition is filed, you can begin accruing debt again. Your attorney will charge for work that has been completed after your skeleton petition is filed- completing and filing your standard petition, attending your 341 Meeting of Creditors, etc. Your payment plan will represent your costs for these services.
One benefit of filing with a post-filing payment plan is that your payments could actually help you improve your credit after bankruptcy. Confirm with your attorney that your plan will include credit reporting. While failing to make your payments after bankruptcy will hurt your score, timely payments will slowly and steadily help you build a new positive credit history. You should look for a post-filing payment plan with a 0% interest rate. Whenever possible, your attorney should give you the option of picking your own payment dates and frequencies. Most often, your balance must be paid off within 12 months of filing.
Considering a Medical Debt Bankruptcy in Arizona?
If you’re considering bankruptcy in Arizona due to medical debt, you’re not alone- medical bills are actually the leading cause of bankruptcy in the United States. Even with years of careful budgeting and financial planning, a medical emergency can create debt that would be impossible for you to escape on your own. Don’t assume that you are out of options. Bankruptcy could be the relief you need to clear away debts and start a new financial future.
Our Arizona bankruptcy lawyers have the knowledge and experience to guide you through a bankruptcy as quickly and painlessly as possible. If there is a better solution for you, our lawyers will help you find it. If bankruptcy is appropriate, we offer affordable rates and payment plan options starting at zero dollars down to get you filed. For more information, call or use our online form to schedule your free case evaluation today.
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