Medical debt is one of the easiest types of debt to discharge in bankruptcy. Here is what you need to know.
Medical Debt in Chapter 7
In Chapter 7, medical bills are eliminated completely when you receive your discharge -- typically 3-4 months after filing. There is no partial repayment, no negotiation, and no special procedures. You list the medical providers on your schedules as unsecured creditors, and the discharge wipes the slate clean.
Medical Debt in Chapter 13
In Chapter 13, medical bills are general unsecured claims. They are paid the same percentage as other unsecured creditors through your repayment plan. In many Chapter 13 plans, unsecured creditors receive little or nothing (0-10%). The remaining balance is discharged when you complete the plan.
Scale of the Problem
Medical debt is the number one cause of bankruptcy in America. Studies estimate that 62-66% of all bankruptcy filings involve medical debt as a contributing factor. The average medical debt in bankruptcy cases exceeds $5,000, but many cases involve $50,000-$100,000+ in hospital bills from a single event.
Alternatives to Consider First
- Negotiate directly: Hospitals often accept 40-60% of the billed amount for cash payment
- Charity care: Nonprofit hospitals are required to have financial assistance programs
- Payment plans: Most providers offer interest-free payment plans
- Credit report removal: Medical debt under $500 no longer appears on credit reports (2023 rule)
- Statute of limitations: Check whether the debt is time-barred in your state
If medical debt is combined with other debts and the total burden is unsustainable, bankruptcy provides a comprehensive solution.