Pre-bankruptcy Counseling
Federal law mandates that you must attend ninety minutes of approved credit counseling before you’re allowed to file for bankruptcy. The cost differs from provider to provider, but it’s often around $50.
What is an Unsecured Debt?
Under the bankruptcy code, medical bills are considered unsecured debts due to the fact there is no collateral the creditors can take from you if you don’t pay. There are actually two types of unsecured debt: Priority and Non-priority. You still have to pay priority debts such as child support and taxes after your bankruptcy case is over. For both Chapter 7 and Chapter 13, medical bills are not priority debts and are therefore dischargeable.
Chapter 7
As soon as you file for bankruptcy protection, your creditors are prevented from contacting you to demand payment. You’ll be appointed a bankruptcy trustee who will control all of your non-exempt assets to sell or liquidate them. The money will go to your creditors to pay your debt. In most cases, debtors don’t lose much (if any) property. In the event the trustee cannot raise any money, your medical bills will be discharged.
Qualifying for Chapter 7 is not automatic. You’ll have to pass a means test to show your income is at or below the median income level in Florida.
Chapter 13
If your income is above the median income level, filling for Chapter 13 may be an option for you. You’ll have to give the trustee your monthly disposable income once you’ve paid regular living expenses. This money will be applied toward your debts which will get paid off within three to five years. It’s likely that the trustee will not pay off your medical bills in full since they are unsecured, non-priority debts. Once the creditors for the medical bills are paid the minimum amount they would have received had you filed for Chapter 7, the remaining balances will be discharged once your payment plan comes to an end.
To learn more about filing for bankruptcy due to high medical bills, please contact us. We have knowledgeable bankruptcy lawyers who will determine the best option for your situation.
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