How Are Medical Bills Treated in Chapter 13 Bankruptcy?

When considering filing for bankruptcy, it is important to know how medical bills are handled in the process. The bankruptcy process may result in paying off medical bills in full, a percentage of them, or a total discharge of the debt. However, many medical providers may still sue you for payment. In addition, they may file for money judgments or levy your bank account or real estate. In such cases, a bankruptcy cannot reverse the damage done to your credit.

The Chapter 13 bankruptcy procedure follows the same structure as chapter 7 bankruptcy. Medical bills fall last in the payment hierarchy. Once these debts are paid, the majority of your plan payment will go to your mortgage, car payment arrearage, past-due support and taxes. Unsecured creditors will then receive a pro rata portion of the remaining funds. This method is sometimes referred to as paying pennies on the dollar, as the amount of money that is paid to unsecured creditors is small compared to the total of all other debt. If you have a steady income, it may be possible to qualify for 100% repayment.

When you file for Chapter 13 bankruptcy, your debt will be grouped into four categories. Each category is assigned a priority. Certain types of debt are exempt from elimination in bankruptcy, such as student loans or child support. Medical bills, however, will not receive special treatment in this process. In other words, in Chapter 13 bankruptcy, medical bills are categorized as general unsecured debt, similar to credit card debt. However, they will still be paid through a repayment plan.