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Medical Debt Dischargeable in Bankruptcy

Nothing Sacred About Medical Debt or Hospital Debt …

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Medical Debt: An Ongoing Issue

Discharging medical debt is one of the primary reasons that a good percentage of Americans file Chapter 7 or Chapter 13 bankruptcy. Our healthcare industry is largely premised on a for-profit motive and operates outside any particular mission purely involving the provision of health-care.

Hospitals exist to make money and to purvey pharmaceutical and other medical products for the financial benefit of pharmaceutical companies and the insurance industry. The cast on your arm and the prescription scrip in your pocket are simply products sold, no different than iPhones or hub-caps.

Despite the claims of political candidates (which were particularly rife during the 2008 Presidential Election cycle) that, if you don’t have money, you don’t have to pay your bill at a hospital receiving government funding, medical collections departments and the third-party collections agencies that medical service providers refer their unpaid bills and sell their unpaid debt to are unbelievably aggressive creditors.

Sure, you might not have to pay on the spot—but don’t plan on getting a good night’s sleep for the next 6 years while the phone rings and rings … and rings.

Allegedly “non-profit” hospitals, in fact, sue their poorest “customers,” even those on welfare, just as often and as viciously as any other creditor—and with the same usurious interest-rates. 

Worse, given the sky-rocketing cost of healthcare in the US, a simple operation can result in a bill of several thousand dollars … A serious medical procedure and lengthy hospital stay can easily hit the six-figure mark, regardless of what you may or may not earn.

There is no way to “budget” around unforeseen medical events that result in such debt.

Bankruptcy Will Erase Medical Debt Completely at 0% Interest

Luckily, despite the unfounded rumor that there is something “special” or “protected” about medical debt, this is not the case. A Chapter 7 bankruptcy will discharge your obligation to pay anything back at all on medical debt in any amount—and there is no limit on the amount that can be discharged.

Chapter 13 bankruptcy does require that some amount of the debt you owe be repaid over 3-5 years—but medical debt is treated at the lowest “priority” in a Chapter 13 repayment plan. In Chapter 13, medical creditors only receive whatever is left over from your monthly Chapter 13 plan payments after absolutely everyone else you owe money to (including your own lawyer) is paid first.

Not only is nothing “sacred” about medical debt, it is treated with the least amount of regard and challenge of any sort of debt.

Short of Elective Plastic Surgery, Medical Debt is “Fraud-Proof” in Bankruptcy

Creditors have very little wiggle-room within the bankruptcy process concerning the discharge of their debt. Other than the few types of debt protected from discharge by the Bankruptcy Code (child support, recent tax debt, etc.), only if you have incurred your debt by way of some variety of fraud can a creditor argue that the debt you owe should not be discharged.

No one “fraudulently” gets hit by a bus or comes down with cancer or some other serious illness. Creditors holding and attempting to collect medical debt are simply unable to make any serious argument that their debt should be excepted from discharge on the basis that the debt was incurred by way of fraud.

In most circumstances, bankruptcy is the simplest way to escape medical debt that might, at first glance, seem inescapable.

If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.

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