Passing The Means Test For Chapter 7 Bankruptcy

Passing The Means Test For Chapter 7 Bankruptcy
Information in this article does not constitute legal advice, it is for informational purposes only, and may not constitute the most up-to-date information. Readers should contact their attorney for advice on any particular legal matter.

What Is Medical Bankruptcy?

When it comes to consumer debt, many people believe it is caused by excessive shopping or poor financial habits. However, did you know that medical debt is currently one of the leading causes of financial ruin? According to the Kaiser Family Foundation (KFF), over 25% of Americans find it challenging to pay their medical bills. Shockingly, a KFF study revealed that 9% of Americans had filed for bankruptcy due to medical bills.

While there is no such thing as "medical bankruptcy," medical debt can lead to a "medical hardship" that can cause financial ruin. Most people are unaware that filing for medical bankruptcy does not limit the bankruptcy to pending medical bills only. Medical debts are considered unsecured debt, similar to credit card debt, overdue utility bills, and personal loans. Therefore, when you file for medical debt relief, your other unsecured debt and lost income due to illness will be considered as well.

If you're interested in learning more about medical debt forgiveness for the disabled, check out our related reading section.


Are you struggling with debt and considering your options for relief? It's important to weigh the pros and cons of each option before making a decision. Some popular choices include Chapter 7 bankruptcy, Chapter 13 bankruptcy, debt settlement, debt payoff planning, and debt management. Each option comes with its own set of costs and benefits, so it's crucial to do your research and make an informed decision.

To help you with this process, we've created a debt relief options calculator that allows you to compare the main options side by side. This tool takes into account the nuances of each option and provides a holistic view of the pros and cons of each. By using this calculator, you can gain a better understanding of which option may be best for your unique situation.

Reasons to Consider Medical Bankruptcy:

It's a common misconception that having insurance coverage will protect you from financial ruin. Unfortunately, many people only realize this after it's too late. Even with the high cost of medical insurance premiums today, health insurance only offers partial protection against bankruptcy.

Medical bankruptcy is often the result of insurance deductibles that don't cover all emergency medical expenses. This leaves individuals with a massive bill that their income simply can't cover. To make matters worse, ongoing medical expenses can exacerbate the situation.

1.  How do Hospitals Pursue Unpaid Debt Differently than Credit Card Providers?

When you owe money for medical bills, hospitals will try different ways to get you to pay. The first step is usually to use their own collections department. If that doesn't work, they may try other methods.

Although it's not common for hospitals to take patients to court over unpaid medical bills, it is happening more often. As deductibles rise and patients' debts increase, more hospitals and doctors are turning to the courts to collect money and keep the healthcare system going. They argue that they have to take action against patients who can afford to pay.

Another option hospitals and medical practices are using more often is selling patient debts to debt buyers. These collection agencies pay hospitals a small amount of money for every dollar of debt, hoping to collect more from patients than they paid. Hospitals sell the rights to patient debt to distance themselves from the aggressive tactics of debt collectors.

 2.  Will my Doctor Stop Treating Me if I File a Medical Bankruptcy?

When someone files for medical bankruptcy, they may worry about whether they will still be able to receive medical care. Once the court approves the "discharge order," the debtor is no longer liable for the medical debt, and the hospital or doctor cannot demand payment.

However, if a patient has unpaid medical debt, a hospital may refuse to provide future services. If this happens, the medical care provider must terminate the doctor-patient relationship correctly and create a plan for future care. If they do not, they could face ethical and legal consequences.

If a doctor decides to end the relationship, they must give the patient notice, especially if the patient is receiving ongoing medical care. But in a medical emergency, the doctor cannot refuse to provide care. If a debtor wants to continue seeing their doctor, they can arrange to pay the debt even after the bankruptcy discharge.

For more information on filing for medical bankruptcy, please visit The Balance.

3. Will a Medical Bankruptcy Eliminate all My Medical Debt?

When you file for medical bankruptcy, your debts are divided into two categories: non-priority and priority debt. It's important to note that bankruptcy won't eliminate all debts, such as recent overdue taxes. However, medical debts are considered general unsecured debts, like credit cards, and are not given priority treatment. This means that wiping them out through bankruptcy is a relatively straightforward process.

So, if you're struggling with medical debt, filing for bankruptcy may be a viable option for you. By eliminating these debts, you can get back on track financially and focus on your health and well-being without the added stress of overwhelming medical bills.

How to Eliminate Medical Bills through Bankruptcy

Did you know that you can get rid of medical debt through both Chapter 7 and Chapter 13 bankruptcy? The decision on which one to go for depends on your eligibility and what makes more sense for your situation.

Chapter 7 Bankruptcy

If you're struggling with medical debt, declaring Chapter 7 bankruptcy could be a viable solution. This type of bankruptcy can eliminate your medical bills and other unsecured debts, without any limit on the amount. Even medical bills paid through credit cards can be discharged along with credit card debt. However, to qualify for Chapter 7, your disposable earnings must pass the Chapter 7 Means Test, which assesses whether your income is low enough to be eligible.

By filing for Chapter 7 bankruptcy, you can finally get rid of the overwhelming medical bills that have been causing you stress. This can provide a fresh start and a chance to rebuild your financial stability. Keep in mind that there are some challenges to consider, such as the impact on your credit score and the potential loss of assets. Therefore, it's important to weigh the benefits and drawbacks before making a decision.

 Chapter 13 Bankruptcy

When you file for Chapter 13 bankruptcy, your medical bills are considered as part of your general unsecured debts. This means that your payments towards these bills will be determined by your expenses, income, and nonexempt assets. Each creditor will receive a portion of the total amount allocated for the payment of debts. However, it's important to note that if your income is not enough to cover the debts in full, you may not be eligible for Chapter 13. Additionally, your debts and medical bills cannot exceed the allowed Chapter 13 debt limit.

If you're unsure about how much you'll need to pay each month and for how long, you can use our free Chapter 13 calculator. This tool will help you estimate your monthly payment and the duration of your Chapter 13 bankruptcy.

Alternative Options to a Medical Bankruptcy

Bankruptcy is not the only option when facing financial difficulties. In fact, there are several alternatives that come with their own set of advantages and disadvantages. It's important to have all the information at your disposal to make an informed decision.

Let's take a closer look at some of these alternatives:

Debt Payoff Planning

If you're struggling with debt, there are ways to manage it without resorting to bankruptcy. Two popular methods are the snowball and avalanche approaches. But now, there's a new option on the market: the Savvy Method. This innovative strategy takes a more personalized and data-driven approach to debt payoff, helping you to create a plan that fits your unique circumstances.

The Savvy Method is all about customizing your debt payoff plan to your specific needs. By analyzing your financial situation and spending habits, the method identifies the most effective way to pay off your debt. This could involve increasing your income, reducing expenses, or a combination of both. With the Savvy Method, you'll have a clear roadmap to becoming debt-free.

Of course, managing debt is never easy, and the Savvy Method is no exception. It requires discipline, commitment, and a willingness to make tough choices. But for those who are serious about taking control of their finances, the benefits can be life-changing. With the Savvy Method, you can avoid bankruptcy, reduce stress, and build a brighter financial future.

Debt Settlement

If you're struggling to pay off your medical bills, there is a solution: debt settlement. This allows you to pay less than what you owe. By working with a professional debt settlement agency, they will reach out to the hospital, doctor, or collection agency on your behalf to negotiate.

Typically, the creditor will agree to accept a lower amount than what you owe. It's recommended to start the debt settlement process early, before your debt is sent to a collection agency by your doctor. This way, a skilled debt specialist can negotiate a favorable deal for you.

Debt Management

Do you have medical bills piling up and no idea how to pay them off? A debt management alternative might just be the solution you need. This strategic approach can help you eliminate unsecured debts, like medical bills, by working with debt management agencies who will negotiate with your creditors on your behalf.

One of the benefits of a debt management alternative is that you can reduce your interest rates and monthly payments, making it easier to manage your debt. Debt management agencies may also advocate for waivers or reductions of penalties, helping you save even more money. The payment plan typically runs for 3 to 5 years, allowing you to pay off your debts in a manageable way.

Before diving into a medical debt management plan, it's important to speak with a credit counselor. Many of these counselors offer free services, but some may charge a fee. They can help you determine if debt management is the right solution for you and guide you through the process.

 Medical Bankruptcy Final Thoughts

Now that you have this information, you can make a more informed decision about medical bankruptcy. It's important to know your options so you can take the first step towards becoming debt-free. Don't wait, start your journey today!

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