Many people live from paycheck to paycheck. When a medical crisis occurs—a diagnosis of diabetes or injuries from a car accident—the results can be catastrophic not only physically, but also financially. Hospital bills accumulate and can be very expensive. Even those who have savings set aside for just such an emergency can find themselves deep in debt to doctors, hospitals, and testing laboratories. Compounding the stress associated with a health problem or an injury is the likelihood of receiving calls at all hours from collection agencies trying to obtain payment for these extensive medical debts.

What Are the Rules for Discharging Medical Bills Through Bankruptcy?

First, you should be aware that you can’t selectively discharge your medical bills. In other words, you cannot choose to have medical debts discharged, while choosing to pay off other debts. Creditors are not equal, but all your debts must be put in front of a trustee who will then determine their order of priority. Therefore, bankruptcy may not be appropriate for those who only owe small amounts to health care providers but have little or no other debt. This is also true when that debt (medical bills) has not had a serious impact on other debts, such as your ability to make mortgage payments, car payments, credit card bills, or any another debt.

Also, you cannot tack on additional debts after you file your case. Therefore, bankruptcy is only appropriate when the medical debt is so severe it impacts all of your finances, and after all medical bills have been issued. You should carefully check all sources that may bill you after a diagnosis or accident. It is not uncommon for medical care providers to bill you up to many months after the time of care.

Because the bankruptcy code places limitations on the frequency of discharges any individual may receive, you don’t want to receive an additional medical bill that could have been discharged after you have already filed. You will not be able to discharge those amounts, at least not right away. All of your debt, not just your medical debt, must be included when you file. However, the key question is ‘when was the service provided’? This means that even if you have still not received the physical ‘bill’ in the mail, as long as the medical service was provided before you file your bankruptcy, you can discharge that medical bill in your bankruptcy.

What Kind of Bankruptcy is Appropriate to File When Addressing Medical Debt?