The Bankruptcy Code allows debtors to pay off or discharge medical debt through Chapter 7 or Chapter 13 bankruptcy.
A Chapter 7 bankruptcy may be the best option for people who have low income. You do not need to have a certain amount of debt. Medical debt can be completely eliminated in Chapter 7 bankruptcy, along with the majority of other unsecured debt (debt that isn’t secured by security).
You could file for Chapter 13 bankruptcy if you don’t meet the requirements for Chapter 7 bankruptcy, or if you own assets that you might lose in a Chapter 7 bankruptcy. You may pay back a percentage of the medical debt you can afford through your repayment plan in Chapter 13 bankruptcy. At the conclusion of the case, the court will discharge (wipe out) the remainder.
Many debtors consider Chapter 7 bankruptcy because medical debt may be discharged if it is not paid off through the liquidation of assets. In Chapter 13 bankruptcy, medical debt is only discharged after debtors have completed a repayment plan, which may address the medical debt or higher priority debts. However, filing Chapter 13 may be advantageous in some cases, since it gives debtors the opportunity to reschedule secured loans and keep certain assets.