One of the reasons for passing the Affordable Care Act of 2010 was to reduce health care costs and make insurance more affordable for everyone. To some extent, the ACA has been a success. Health insurance is more accessible now than at any time it has ever been in the past. Millions of people now have access to coverage thanks to federal subsidies that they otherwise never would have had.

However, the ACA has not made health care as affordable as many would have helped. In 2015, medical bills were still the number one reason that most Americans filed for bankruptcy. And having health insurance doesn’t necessarily mean that high medical bills won’t drive you to bankruptcy. Even with the new protections of the ACA, high deductibles or other costs that aren’t covered by insurance still drive many to seek bankruptcy.

It’s an alarming trend, but the good news is that medical bills are usually quite easy to eliminate when filing for bankruptcy.

How Medical Bills are Treated in Bankruptcy

First, it’s important to understand how bankruptcy works exactly. Soon after you file, a trustee will be assigned to your case. The trustee will review your debts and group them into several different categories such as priority debts, secured debts, or unsecured debts.

Priority debts, such as alimony or child support, can never be discharged in bankruptcy. Secured debts, such as car loans, may have to be renegotiated, or a lender will take possession of the property secured by the debt. Nonpriority unsecured debts such as medical bills, credit card debt, and most types of court judgments are always fully dischargeable in bankruptcy. This means that medical bills are among the last debts paid by the trustee, if they are paid at all.

Eliminating Medical Bills in Chapter 7 or Chapter 13 Bankruptcy

It can be hard to determine when is the right time to file for bankruptcy. Medical bills of a couple thousand dollars alone are likely not reason enough to file for bankruptcy. However, if those couple thousand in medical bills are in addition to tens of thousands of dollars in credit card debt that you’re unable to pay, it may be time to file for bankruptcy.

And having any large medical debt is always an ideal situation for filing for bankruptcy. One concern, however, is whether you’ll be eligible to file for Chapter 7 bankruptcy, which is far preferable to Chapter 13 bankruptcy when it comes to medical bills.

To be eligible to file for Chapter 7 bankruptcy, you must pass the means test, which means showing that your median household income is less than the average for a household of the same size in California. If your income is above the median household income threshold, you must show that once your specific monthly expenses are deducted from your currently monthly income, you do not have enough disposable income to pay your current debts.

If you can’t meet either of those requirements, you’re ineligible to file for Chapter 7 bankruptcy. If you believe that you’re on the bubble of qualifying for Chapter 7, an experienced California bankruptcy attorney may be able to assist you in qualifying. Once you’re in Chapter 7, there is no limit to the amount of medical bills that can be discharged at the end of the bankruptcy case.

If you cannot qualify for Chapter 7 bankruptcy, you may be eligible for a Chapter 13 bankruptcy repayment plan. While this type of bankruptcy is often ideal for debtors seeking to protect their assets and reorganize their debts, it is often not the best choice for those seeking to discharge large medical bills or other types of unsecured debt.

In addition to the requirement that much of this debt be paid back over the course of either three or five years, the biggest downside of Chapter 13 is that it caps unsecured debts at $360,475. If your medical bills, credit cards, and other debts substantially exceed that limit, they’ll still remain at the end of the repayment period.

Thinking About Filing for Bankruptcy?

Bankruptcy may be your only choice if you have tens of thousands of dollars in unpaid medical bills hanging over your head. The Law Offices of Melanie Tavare of Oakland and Hayward can assist you with filing for either Chapter 7 or Chapter 13 bankruptcy. Contact the Law Offices of Melanie Tavare on our website or by calling 510-255-4646.

The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.