Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Medical debt is one of the leading causes of financial stress for many across the country. When medical expenses spiral out of control, filing for bankruptcy can provide a fresh start. However, people often wonder whether medical debt can be discharged through bankruptcy in Wisconsin.
The following guide will answer your questions on this topic. In it, we will explore how medical debt is treated in both Chapter 7 and Chapter 13 bankruptcies in Wisconsin and clarify common misconceptions surrounding the process.
Medical debt refers to the financial obligation one has after receiving medical care. This may include hospital bills, doctor fees, prescriptions, and other healthcare-related services.
Unlike many types of debt, medical bills can pile up quickly. Individuals facing medical debt may have no ability to pay what they owe. According to recent studies, medical bills are a leading cause of bankruptcy in the United States.
Bankruptcy is a legal process designed to help individuals and businesses eliminate or repay their debts under the protection of the bankruptcy court.
For individuals facing overwhelming debt, it provides a way to either discharge debts entirely (in Chapter 7) or reorganize debts into a manageable repayment plan (Chapter 13).
Two primary types of bankruptcy can relieve medical debt: Chapter 7 and Chapter 13. Each type has different implications for medical debt and how it is handled.
In Chapter 7 bankruptcy, individuals with qualifying debts can have their unsecured debts, including medical bills, discharged after liquidating non-exempt assets.
This process is faster than Chapter 13, typically taking about 3-6 months. However, not everyone is eligible for Chapter 7 bankruptcy. You must pass a “means test” to qualify. This test aims to verify your income and ability to repay your debts.
Chapter 13 bankruptcy, on the other hand, allows individuals to keep their assets. Instead of liquidating assets to pay creditors, they repay their creditors over a 3-5-year period based on their income.
While medical debts are included in the repayment plan, they may not be paid in full. Any remaining medical debt is typically discharged after the repayment period ends.
In most cases, medical debt is considered unsecured. That means it is dischargeable in both Chapter 7 and Chapter 13 bankruptcy. Potentially dischargeable medical debt includes bills for hospital stays, doctor visits, and even unpaid medical insurance premiums.
“Under federal law, medical debt is generally dischargeable in both Chapter 13 and 7 of bankruptcies, provided it meets specific criteria. However, the decision depends on individual circumstances and the type of bankruptcy chosen.”
However, not all medical debt may be discharged under certain circumstances. For example, maybe you took out a personal loan specifically to pay for medical expenses. That loan may be treated differently in bankruptcy.
For medical debt to be discharged, it must meet the following criteria:
Each state has specific laws and exemptions that may affect bankruptcy filings. In Wisconsin, these exemptions may impact how medical debt is treated—and whether you can discharge it.
Wisconsin allows certain exemptions that protect a debtor’s assets from being preserved in a Chapter 7 bankruptcy. These exemptions cover family homes, personal property, and retirement accounts.
However, Wisconsin does not have a generous homestead exemption like some other states. This may affect whether you can keep your home in bankruptcy.
“Wisconsin offers a set of state-specific exemptions that may impact how medical debt is handled in bankruptcy. These include exemptions on certain personal property types that could be used to pay off debts.
While medical debts are typically unsecured and dischargeable, Wisconsin’s exemptions can help protect your assets during bankruptcy, providing more security for individuals struggling with medical bills.
One of the most common misconceptions about bankruptcy is that medical debt cannot be discharged. As mentioned earlier, medical debt is usually considered unsecured. It is eligible for discharge in both Chapter 7 and Chapter 13 bankruptcy.
“Many people mistakenly believe that bankruptcy will not help with medical debt, but this is untrue. Medical debt is typically unsecured and can be discharged, providing significant relief to debtors.”
Another misconception is that filing for bankruptcy will affect your ability to receive future medical care or insurance. This is not true.
Bankruptcy does not prevent you from seeking medical treatment, nor will it directly affect your ability to obtain insurance, although it may impact your credit.
If bankruptcy isn’t the best option for you, there are alternatives available to manage medical debt:
Debt consolidation allows you to combine multiple debts into a single payment with a lower interest rate. Medical debt settlement, on the other hand, involves negotiating with creditors to reduce the total amount owed.
These methods may help. However, they may provide different long-term relief than bankruptcy.
Some healthcare providers are willing to negotiate your bills directly. If you explain your financial hardship, they may offer a payment plan or reduce the amount you owe.
It is crucial to seek the advice of a bankruptcy attorney if you’re still considering your options. A professional can help assess your situation and advise on whether bankruptcy or another option is right for you.
Take the following steps if you’re struggling with medical debt and considering bankruptcy:
“If you’re facing significant medical debt, consult a bankruptcy attorney to understand your eligibility and the most suitable bankruptcy option. A legal professional can provide insight into state-specific considerations affecting your bankruptcy case.”
You can file for bankruptcy to discharge medical debt if it meets the unsecured debt criteria.
Most medical debt is dischargeable unless it involves fraud or a personal loan specifically for medical expenses.
No, bankruptcy will not prevent you from obtaining medical care or insurance. However, it may affect your credit, impacting how you pay for medical services.
Your medical debt may be discharged immediately in Chapter 7. Chapter 13 will be included in the repayment plan, and any remaining balance may be discharged after completion.
Medical debt can be overwhelming. Luckily, bankruptcy provides a viable option for those struggling with unpaid medical bills. Both Chapter 7 and Chapter 13 bankruptcies offer ways to discharge medical debt, depending on your circumstances. Wisconsin residents should be aware of state-specific exemptions that may affect the process.
Consulting with an experienced bankruptcy attorney is a crucial first step if you’re considering bankruptcy as a solution to medical debt. They can help you navigate the complexities of the process and determine whether it’s the right option for you.
“By seeking legal advice, you can make informed decisions about your financial future. An experienced bankruptcy attorney can help you explore all available options for managing medical debt.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
