Can You File Bankruptcy on Medical Bills?
Yes. Medical bills, like credit card debts, are unsecured debts. Usually, such debts are dischargeable in both a Chapter 7 and Chapter 13. That’s good news for families. High medical bills are, by far, the leading cause of consumer bankruptcy filings in the United States. Bankruptcy offers relief in other areas as well, mostly from aggressive debt-buyers. More on that below.
Generally, when people file bankruptcy, they are about to go under the waves. People in these situations often desperately clutch onto anything that promises some help. A good Chicago bankruptcy lawyer doesn’t make big promises or offer quick fixes. Instead, an attorney thoroughly evaluates your financial situation, including your needs and goals. Then working with their clients, attorneys plan their work, and then work their plans. This simple and straightforward approach usually produces results that exceed your expectations.
Bankruptcy Basics
Unsecured debts aren’t connected to a house, car, or other collateral. So, the lender cannot foreclose on property or repossess something. However, these lenders have many collection tools at their disposal. Frequently, they sue debtors who fall behind on medical bills and garnish their wages.
Usually, doctors quickly refer unpaid accounts to debt collectors. Most doctors do not want to deal with such accounts. They’d rather pay someone else to deal with them. Since debt-buyers often pay top dollar for these accounts, they’re very anxious to get their money back.
Bankruptcy’s Automatic Stay stops this process dead in its tracks. Debt buyers cannot harass debtors over the phone or through the mail. They also cannot take them to court, garnish their wages, or take any other adverse action, without special permission from the bankruptcy judge.
All parties must receive actual notice of the filing. So, a Chicago bankruptcy lawyer must send notice not only to the doctor or other medical provider, but also to any debt collectors who subsequently acquired the rights to collect that debt. Frequently, these debts change hands two or three times, especially as the debt gets older.
Incidentally, federal and state law requires debt collectors to provide written account verification upon request. As mentioned, many delinquent accounts are transferred two, three, or more times. After so many transfers, the underlying account information is usually unavailable. That’s especially true regarding medical debt. Additional privacy laws sometimes apply.
At the end of the bankruptcy, the judge normally discharges all medical bills and other unsecured debt. Sometimes, a discharge isn’t total relief.
Technically, discharge eliminates the legal obligation to pay the debt. The debt itself remains. So, if XYZ put a lien on David’s property, David’s Chicago bankruptcy lawyer must address that line separately. Bankruptcy does not affect the collateral consequences of a debt. Furthermore, attempting to collect discharged debts is illegal. But some unscrupulous companies try to do so anyway.
Reaffirmation Agreements
A few brief words about reaffirmation agreements. Many patients voluntarily reaffirm some medical debt, to stay in a doctor’s good graces. Usually, the doctor must send a reaffirmation agreement to the debtor’s lawyer. Technically, bankruptcy wipes out all existing loan and repayment agreements.
Many people sign these one-sided reaffirmation agreements without taking full advantage of the opportunity they have.
Before the debtor signs a reaffirmation agreement a lawyer can negotiate with the creditor and change the terms, such as the interest rate, repayment terms, or amount due. A renegotiated reaffirmation agreement makes it much easier to maintain the account going forward.
Connect With a Tough-Minded Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
