Nearly one million Americans file for bankruptcy each year because of medical debt. A sudden illness or accident could put you underwater overnight. And while bankruptcy is not the only option, it remains one of the most powerful tools that debtors have to find financial relief. In this article, we discuss how to get rid of medical debt through bankruptcy, and how a Dallas bankruptcy attorney can help.

Figure Out What Kind of Debt You Have

Under bankruptcy laws, medical debt is treated as an unsecured, nonpriority debt. The good news is that in Chapter 7 bankruptcy, these types of debts can be discharged completely, providing you with much-needed relief.

If you used a credit card to pay for your medical bills, don’t worry. Since credit card debt is also unsecured, nonpriority debt, you can use Chapter 7 to wipe out the debt fairly easily.

Make Sure You Are Eligible for Either Chapter 7 and Chapter 13

A Dallas bankruptcy lawyer can help you determine whether you are eligible for bankruptcy, and whether Chapter 7 or Chapter 13 makes the most sense for your needs. For example, if you don’t pass the means test and therefore don’t qualify for Chapter 7, you may be able to file Chapter 13, which allows you to pay back a portion of your debt. But the eligibility requirements for Chapter 13 are a little different, and the process is a little more complicated. So it’s best to speak to an experienced attorney about your options.

Know Your Options

When it comes to medical debt, there are a few options for people who are struggling to make payments on their home and car loans and monthly expenses. Options may include:

  • Negotiating a deal directly with the hospital to repay a portion of the debt or repay the debt interest-free.
  • Finding a debt consolidator who is willing to purchase your debt for a lower APR and then repaying all the debt in one lump sum.
  • Assessing public options to pay your medical expenses.
  • Filing for Chapter 7 or Chapter 13 bankruptcy.

Check Your Insurance Benefits

Verify that the service you paid for is not covered by your health insurance. If the doctor’s office made a billing mistake and the insurance company should have paid the bill, be sure to be proactive in trying to clear up the error. This can save you thousands.

Negotiate With the Hospital

In some cases, you can haggle with the hospital to reduce the amount owed. In other cases, you may be able to negotiate to repay the principal interest-free. If you call the hospital and tell them that you either refuse to pay their exorbitant rates or simply can’t, the hospital may be more receptive to reducing your outstanding balance.

Negotiate a Repayment Plan

Hospitals are generally more than willing to negotiate a repayment plan. But many find themselves out of work directly after a major medical event. If you have savings you can draw on, you may be able to repay the debt incrementally.

Apply for Medicaid

If you’re out of work, you may qualify for Medicaid. If you do, Medicaid can kick in retroactively and pick up the tab on outstanding medical expenses. You will only have a specific window in which to apply.

If you’re paying off medical debt for your child, they may qualify even if you don’t.

Put the Bill on a Credit Card

While this is not a very good solution as most credit cards will have higher interest rates than other options, it can be a way to get creditors off your back, at least temporarily.

Consider Debt Consolidation

Unless you have sterling credit, most debt consolidators will balk at purchasing your debt. It’s a bit of a catch-22. Those who really need a debt consolidator won’t qualify for one. Those who don’t, will. If you have otherwise good credit, it’s worth a shot to see if a debt consolidator is willing to purchase all of your debt and allow you to repay at a lower interest rate. It never hurts to ask, right?

File for Bankruptcy

You can file for either Chapter 7 or Chapter 13 bankruptcy. In Chapter 7, your debt will be wiped clean immediately, but you will have to deal with your credit taking a temporary dive. If your credit is already in shambles, that’s not much of a loss. If it’s not, you can still rebuild your credit after bankruptcy.

During the rebuilding phase, you can take out secured loans or secured credit cards. Over time, this will improve your credit. For those with already bad credit, your credit is likely to be better than it was before the bankruptcy. For those with sterling credit, you may want to exhaust all other options before filing for bankruptcy.

How to Get Rid of Medical Debt That Has Gone Into Collections

If your medical debt is in collections, so long as the statute of limitations hasn’t run out on it, the collections agency can sue to get a judgment against you. Once they’ve done that, they can garnish your wages, levy your bank account, or place a lien on your real estate. In Texas, the statute of limitations is four years.

Once that statute of limitations has elapsed, the debt is no longer collectible. It will be sold to a collections agency for pennies on the dollar, but all that collections agency can do is harass you. They no longer have any legal means to forcibly extract the debt from your savings or property.

A Dallas Bankruptcy Attorney Can Help

If you’re struggling under a mountain of medical debt and you can’t afford to repay it while still putting food on your table and paying other necessary expenses, bankruptcy can help. Talk to Allmand Law Firm, PLLC today to learn more about how to get rid of medical debt and find the financial relief you need.