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Addressing medical debt through bankruptcy

On Behalf of | Jan 21, 2021 | Consumer Bankruptcy, Medical Debt |

Statistics show that one in three Americans owes huge amounts of medical debt, with 16% of the debt in collections. Debts that have gone to collections can impact credit scores, which makes getting loans harder. Some consumers in Chicago may look to bankruptcy as a means to eliminate debt.

How medical debt gets treated in bankruptcy

Not all debts are treated the same in bankruptcy regardless of the type of filing. A bankruptcy cannot remove non-exempt debts, which typically include past-due utilities, current tax debt, alimony or child support. Medical debt counts as exempt debt, meaning the debtor cannot be forced to pay it.

However, exempt medical debts often aren’t a priority debt commonly falling under “unsecured general debt.” It cannot be the sole reason for bankruptcy since no legal bankruptcy exists for just medical debt.

Under Chapter 13 bankruptcy, medical debt becomes part of a repayment plan devised by the court. However, the amount of medical debt cannot be above a certain threshold, which is currently $1,257,850. Chapter 7 requires the selling of non-exempt assets, but it discharges the remaining debt more quickly than Chapter 13. Debtors commonly get a discharge in three to six months.


Consumers have to meet certain income qualifications to file bankruptcy, but they have other options. If a debtor has fallen behind on medical payments, some medical facilities may be willing to negotiate debts for one lump sum.

Many medical facilities have financial assistance programs for low-income patients, and they may waive payments in some cases. A zero percent introductory credit card, balance transfer card or personal loan can help with some medical bills.

Consumer bankruptcy gives debtors a way out of crushing debt, but it often impacts credit scores for several years. If a debtor feels they have no other options, a bankruptcy attorney may be able to advise them.