Medical Bills and Bankruptcy

Medical bills are generally unsecured debts and may often be discharged through bankruptcy. The treatment of a specific bill depends on the chapter filed, the nature of the debt and the facts of the case.

Chapter 7 may eliminate personal liability for qualifying hospital, doctor, emergency room, ambulance and other medical bills after the debtor completes the case and receives a discharge.

Medical bills are generally treated as nonpriority unsecured debts in Chapter 13. The amount paid depends on income, expenses, assets, plan requirements and other circumstances. A qualifying remaining balance may be discharged after plan completion.

There is no single general minimum amount of medical debt required for every bankruptcy case. Whether filing is appropriate depends on total debt, income, assets, collection pressure, repayment ability and available alternatives.

Yes. A debtor must disclose all known creditors and debts, including hospital bills, doctor bills, ambulance charges, laboratory bills and medical collection accounts.

A debtor generally should not omit a medical provider simply because the debtor wants to continue using that provider. All debts and creditors must be disclosed accurately.

Filing bankruptcy generally creates an automatic stay that stops most collection calls, letters and demands concerning qualifying pre-bankruptcy medical debt.

The automatic stay generally stops the filing or continuation of a lawsuit seeking to collect qualifying medical debt after the bankruptcy case is filed.

Filing bankruptcy generally stops an ongoing wage garnishment based on qualifying medical debt. Prompt notice should be provided to the creditor, collection attorney and employer or payroll department.

Bankruptcy may stop further garnishment activity after filing, but money already removed or frozen may require additional analysis. The timing of the garnishment and applicable exemption law are important.

Bankruptcy may discharge personal liability for a qualifying medical debt judgment. A judgment lien recorded against property may require separate treatment and is not necessarily removed automatically.

Emergency room bills are generally unsecured medical debts and may qualify for discharge, subject to the ordinary bankruptcy rules and the facts of the case.

Ambulance bills are generally unsecured medical debts and may often be included in a Chapter 7 or Chapter 13 bankruptcy case.

Dental bills are generally treated as unsecured medical debts and may qualify for discharge in bankruptcy.

Transferring or assigning a medical debt to a collection agency generally does not prevent the debt from being included in bankruptcy. The medical provider and collection agency should be disclosed when appropriate.

Medical expenses charged to a credit card are generally treated as credit card debt. Recent charges and the circumstances under which they were incurred may require additional review.

A bankruptcy discharge generally protects only the debtor who filed. A non-filing cosigner or guarantor may remain personally responsible for the medical debt.

Chapter 13 may provide a temporary codebtor stay for certain consumer debts. The protection is limited, and the creditor may seek permission to proceed against the cosigner in some circumstances.

A bankruptcy case generally addresses debts arising before the filing date. Medical bills incurred after filing are ordinarily post-petition debts and may remain the debtor’s responsibility.

The timing of a bankruptcy filing may be important when additional treatment or medical bills are expected. A bankruptcy attorney can review the expected treatment, collection risks and other financial circumstances.

Bankruptcy does not legally prohibit a person from receiving future medical treatment. However, a particular non-emergency provider may have its own policies concerning future services, deposits or payment arrangements.

A hospital lien may involve rights against settlement proceeds or other property and may not be eliminated merely because personal liability for the underlying bill is discharged. The lien and applicable state law should be reviewed separately.

Bankruptcy does not automatically delete accurate account history. Medical accounts included in bankruptcy should generally be reported consistently with the bankruptcy and should not show an improper continuing personal balance after discharge.

A payment plan may be appropriate when the debt is manageable. Bankruptcy may be considered when medical debt is combined with other debts, lawsuits, judgments, garnishment or an inability to maintain reasonable living expenses.

Ferguson & Ferguson can evaluate whether medical bills may be discharged, determine Chapter 7 or Chapter 13 eligibility, review collection lawsuits, judgments, liens and garnishments, and help stop qualifying collection activity. Call the Huntsville office at 256-534-3435 or the Decatur office at 256-350-7200 to schedule a free consultation.