Bankruptcy is a process set out in the federal U.S. Bankruptcy Code. The Bankruptcy Code governs all bankruptcies, with a federal bankruptcy court in every judicial district nationwide – 90 of them. The object of the federal bankruptcy laws is to provide debtors with a fresh start from debts they have no chance of repaying, giving the “honest but unfortunate debtor” a chance to begin anew.
This works through the bankruptcy court’s discharge of debts for qualified debtors, meaning those debts never have to be repaid. This happens for individuals through what is known as Chapter 7 bankruptcy. Other forms of bankruptcy require at least some repayment. For those who qualify, though, Chapter 7 can provide release from responsibility for repaying most debts, including medical bills.
If you have medical bills you can’t pay, and you meet the requirements for a Chapter 7 bankruptcy, it is possible for you to discharge those debts and not have to repay them. In fact, most personal debts are dischargeable under Chapter 7, with some exceptions. Chapter 7 bankruptcies do not require a repayment plan, and with California’s generous homestead exemptions, you likely can keep your house, as well, unless you have a very high amount of equity.
In a Chapter 7 bankruptcy, it is possible that you will have to sell some of your assets to pay some debts –it is not guaranteed that this will happen, as many assets might be covered by exemptions, including the equity in your home – but that generally applies only to secured debts, where the party to whom the money is owed holds some kind of lien or security interest, such as your mortgage holder or the company to whom you owe money for your car payments. In both cases, though, you likely can keep your home and your vehicle and continue to make payments. In general, you probably will not be required to sell anything or give up any of your possessions that are secured by a lien.
If you qualify for filing for bankruptcy under Chapter 7 and have unpaid medical bills, bankruptcy law requires that your creditors stop any lawsuits or other actions to collect on those bills. Further, if you are granted a discharge of debts under Chapter 7, you will no longer be obligated to pay those bills covered by your Chapter 7 discharge, including any medical bills. There are some bills that cannot be eliminated by a Chapter 7 discharge, such as student loans and child support debts, but medical bills are eligible for discharge in a Chapter 7 bankruptcy.
If you have medical bills that you cannot pay, you should talk to a Chapter 7 bankruptcy attorney. The attorneys of Miranda, Magden & Miranda, LLP, can provide the assistance that you need to deal with your problem.
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