What Should You Know About Medical Debts & Bankruptcies?

Did you know that medical debt accounts for over 66% of bankruptcy cases? Medical debt can accumulate rapidly, making it difficult to pay for even the bare necessities and maintain an acceptable standard of living. Fortunately, filing for bankruptcy may be able to rid you of debt if you are unable to make payments.

But how do you become debt-free? You can reach out to a bankruptcy professional or a non-profit organization for guidance and counseling. Medical bankruptcy lawyers advise clients about the benefits and drawbacks of filing for Chapter 7 or Chapter 13. Free financial counseling services and support are available from organizations, governmental bodies, online resources, and local community resources that provide free financial counseling and support. These resources can be quite helpful during this trying time. 

This article will cover the basics of medical debt and bankruptcy, provide advice on how to handle money problems associated with healthcare, and help you make wise choices that will safeguard your financial security.

Medical Debt and Bankruptcy

The Law Office of Christopher P. Walker, P.C., reminds us that filing for bankruptcy will have long-term effects. It can lower credit scores, prevent one from obtaining new credit, and create stigma that can interfere with one’s ability to live a normal life. 

Medical debt is a common reason people consider filing for bankruptcy. Unlike other debts, medical bills often come unexpectedly and can quickly accumulate to unmanageable levels. Bankruptcy law, specifically Chapter 7 or Chapter 13, offers a way out for anyone drowning in medical expenses.

Chapter 7: Bankruptcy refers to the liquidation of assets to pay off debts. Medical debts are classified as unsecured debts and are typically discharged in Chapter 7, providing a fresh start for the individual. 

Chapter 13: Bankruptcy, also known as reorganization bankruptcy. In this way, debtors are allowed to create a repayment plan that spans three to five years. This type of bankruptcy allows a person to keep their assets while gradually paying off their debts, including medical bills.

Impact on Credit Score

Filing for bankruptcy has a negative impact on your credit score. A bankruptcy filing can remain on your credit report for up to ten years, making it challenging to qualify for new credit or loans. Your credit score will likely drop substantially after filing for bankruptcy, making it harder to secure favorable interest rates on future loans.

As a result of the bankruptcy, your credit score may decrease by a significant amount, depending on your previous credit history. This lower credit score can affect your ability to obtain credit cards, mortgages, or car loans in the future. While bankruptcy can provide relief from overwhelming medical debts, consider the long-term consequences of your creditworthiness before making a decision. Also remember that you will still have the opportunity to improve your financial situation over time by working on rebuilding your credit after bankruptcy. 

Legal Process Overview

The legal process when dealing with medical debts and bankruptcy requires careful attention to detail and adherence to specific procedures. When medical debts become overwhelming for you, the first step is typically to consult with a bankruptcy attorney. This legal professional will assess your situation, explain the available options, and guide you through the process.

In most cases, filing for bankruptcy means choosing between Chapter 7 and Chapter 13. Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 requires a repayment plan over several years. Once you’ve decided on the appropriate chapter, the attorney will help you gather and organize the necessary financial documents for the bankruptcy petition.

After filing the petition, an automatic stay goes into effect, halting most collection actions by creditors. The court will then appoint a trustee to oversee your case, review the submitted documents, and conduct a meeting of creditors. 

Alternatives to Bankruptcy

There are alternatives you can look at to address your medical debts without the long-term consequences of filing for bankruptcy. Here are some alternatives you can try: 

Debt Settlement: It involves negotiating with creditors to settle for a lower amount than what you owe to reduce your overall debt burden. This may have a negative impact on your credit score and may not always be successful.

Debt Consolidation: In it, multiple debts will be combined into a single loan with a lower interest rate, making it easier to manage your payments. This option can simplify your finances, but it requires discipline to avoid accumulating more debt.

Payment Plan: You’ll be working out a payment plan with your medical providers. Many healthcare facilities offer financial assistance programs or flexible payment options that can help you manage your medical bills without resorting to bankruptcy. 

Credit Counseling: You can seek credit counseling from non-profit organizations that can provide you with valuable advice on managing your debts and creating a sustainable repayment plan. These alternatives offer ways to address your medical debts without the long-term consequences of filing for bankruptcy.

Professional Help

Seeking professional help can provide you with expert guidance and support in finding the best solution for your financial situation. A bankruptcy attorney specializing in medical debt can assess your specific circumstances, explain your options, and help you with the complex process of filing for bankruptcy if that’s the most suitable path for you.

These professionals have the knowledge and experience to negotiate with creditors on your behalf, potentially reducing the amount you owe or arranging more favorable repayment terms. They’ll also make sure that you understand the legal implications of bankruptcy and assist you in completing all the necessary paperwork accurately and on time.


Medical debts can have a significant impact on your financial well-being. Filing for bankruptcy may be a viable option, but you should first look for alternatives available to you and seek professional help before making a decision.

Your credit score may be affected, but there are ways to rebuild and improve it over time. Research more about your situation, and don’t hesitate to ask for assistance when needed.

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