Everybody understands medical care can be expensive, but it can be hard to wrap your head around just how devastating skyrocketing medical bills can be. Hundreds of thousands of Americans know this reality all too well, however.
According to one CNBC report, about two-thirds of all bankruptcies in America are because of medical issues. That could be either due to expensive care, or lack of income because the health issue made it impossible to work. Researchers estimate every year more than half a million Americans file bankruptcy because of medical bills. In bankruptcy cases, what exactly happens to medical debts?
The individual consumer bankruptcy process includes what is known as a discharge of certain debts. If a debt is discharged, it means the person who owed the money is no longer obligated to pay that debt. In addition, the person or organization to whom money was owed can not come after the individual for further payments.
Bankruptcy leads to the discharge of many types of debt – including medical bills. While all cases are different, a personal bankruptcy generally gives someone a clean slate when it comes to mounting health expenses.
In addition to medical bills, other types of dischargeable debt include credit card debt, personal loans and utility bills.
Similarly, bankruptcy does not result in the discharge of some types of debt. That includes, but is not limited to:
- Child support payments
- Criminal fines
- Fines related to drunk driving
- Some tax obligations
- Student loans (except in very specific circumstances)
Other debts that have some type of collateral attached (think a car loan, for example) can be more complicated.
This is only a brief overview of the types of relief bankruptcy can offer, and does not get into the key differences between Chapter 7 and Chapter 13 bankruptcy. Because each situation is unique, it’s important to speak with an attorney who can answer your questions and offer a more detailed explanation. Know that with medical debts however, bankruptcy may be a way to find light at the end of the tunnel.