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When Medical Debt Piles Up: Filing for Bankruptcy

Shocking Cost of Medical Care

If you have substantial medical debt, but know that you will incur additional medical expenses (or other debts) soon, it may make sense to postpone filing for bankruptcy. The reason is that a bankruptcy case will only discharge those debts incurred as of the date the case was filed. By postponing the filing until after the additional debts are incurred, the full list of debts can qualify for discharge and you will receive true relief from all the medical debt.

If you have previously filed a bankruptcy case, you should be careful, however, to ensure that the prior bankruptcy will not prevent you from obtaining a discharge. If a prior discharge was received in a Ch. 7 case, a debtor must wait eight years from the date of the previous filing before another Ch. 7 discharge can be obtained from the court. Seeking Ch. 13 relief? A debtor must wait four years to obtain a discharge of debts, but may file a Ch. 13 case before that date to begin a repayment plan.

If a prior Ch. 13 discharge was received, the debtor must wait six years from the date of filing to file a Ch. 7 (unless 100% of the unsecured debts (such as credit card and medical debts) were paid off in the prior case or court permission of a reduced amount was granted). To receive another Chapter 13 discharge, however, the debtor need only wait two years before filing again. Remember: The effective date is the date the prior bankruptcy case was filed, not the date the discharge order was entered.

As stated above, only debts incurred as of the date of filing are eligible for discharge. Any debts incurred after the date of filing are not included in the schedules and are not part of the bankruptcy case. For this reason, if you continue to incur medical debts, you should consider waiting to file the bankruptcy case until the medical debts have been fully incurred. Failing to do so may result in you not obtaining a full discharge of the medical debt and being liable for the additional debts incurred after filing.

One note of caution should considered, however, if you have filed a previous claim for public assistance for the medical debt. In some limited cases, the filing of a Ch.7 bankruptcy case before a decision regarding public assistance is obtained could result in claims by the trustee or public aid administration for improper or fraudulent actions by the debtor. As always, consult with an experienced attorney with a good reputation. Arm yourself with information, and make the determination that makes the most sense for you taking into account all the options and factors.

Medical debt can be overwhelming, especially when a medical condition occurs without warning. A serious medical condition can be financially devastating even for frugal families. When you are going through the process of treatment and recovery, you should not be worrying about the economic consequences. Once you have recovered and survey the financial impact, bankruptcy is often the only sensible option. It does not have to be the end of your financial stability. When medical debt piles up, filing for bankruptcy may be your best option. You can obtain a new start through bankruptcy, which is exactly why the bankruptcy laws were enacted.


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