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Can medical debt be discharged during bankruptcy?

Falling ill or facing an injury may leave you strapped for cash. If you are unable to work, you may sink further and further into debt. Bankruptcy may prove the best way to relieve some of the stress debt causes.

What happens to the medical debt during bankruptcy? The good news is that, like most unsecured debts, medical bills are available for discharge. Depending on the route you take through the process, the way the court handles it varies.

Chapter 7 discharge

Chapter 7 bankruptcy involves liquidating certain assets to pay a portion of your debts. A court-appointed trustee will place your creditors in line to receive payment after this liquidation. Secured debts are those things with collateral attached, such as your home. Unless you want out of your mortgage, you will likely retain your home even during liquidation. After secured debts come those that do not have collateral. These unsecured debts include credit cards and medical bills. If you follow the terms set forth by the trustee, the judge will discharge your unsecured debts if there is not enough money to pay them. This includes your medical bills.

Chapter 13 repayment

Chapter 13 bankruptcy does involve the discharge of unsecured debts, but it also requires repayment of a portion of the debt. The hallmark of Chapter 13 bankruptcy is a repayment plan that fits with your income. The trustee gathers your debts, looks at your income, and gives you one monthly payment to make for a period not to exceed five years. After you make the requisite payments, the judge will discharge the remaining debts, including medical bills.

Bankruptcy may provide you a way to get out from under the medical bills that put you in debt in the first place.