Should I File for Bankruptcy Before or After my Medical Procedure?

If you plan to file for bankruptcy and you also have plans to undergo a medical procedure, you will most likely benefit from delaying your filing until after you have had your procedure. Bankruptcy only discharges debt incurred prior to filing; if you first file for bankruptcy and then add medical bills incurred at a later date, those medical bills will not be covered by your existing bankruptcy agreement, even if you are unable to pay your medical bills.

Medical debt is eligible for forgiveness under both Chapter 7 and Chapter 13 bankruptcies, which are the two most common types of individual bankruptcy filings. Chapter 7 bankruptcy is a complete forgiveness of debt, whereas Chapter 13 bankruptcy includes a plan for partial repayment of the debt and forgiveness of the remainder. Which type of filing is best for you depends on your income, amount of debt, and types (and the value of) assets you have in your possession.

It is generally inadvisable to generate debt with the intention of having it forgiven through bankruptcy; it can be determined that the additional charges were incurred fraudulently, and such debt will be exempt from the bankruptcy agreement. If you’re about to petition for bankruptcy, it would be unwise to go on a shopping spree or take off on a blowout Vegas vacation, for example. However, medical bills are not subject to this type of scrutiny. There’s no cap or limit on how much medical debt can be forgiven in a bankruptcy.

There is, however, a limit on how often one can file for bankruptcy. The number of years varies, depending on the type of bankruptcy filing and how the debt was discharged. If you have previously had debt discharged in a Chapter 7 filing, you must wait eight years from the date you filed for that bankruptcy before you can qualify to file for another Chapter 7 bankruptcy. If you filed a Chapter 7 and now wish to file for a Chapter 13, there must be at least four years between your Chapter 7 date of filing and your new Chapter 13 case if you are looking to discharge more debt.

These are just a few examples, but as you can see, no type of bankruptcy filing can be arranged back-to-back to cover new debts, medical or otherwise. This means that if you file for bankruptcy, then incur more medical debt, you’ll be saddled with it until you can pay it, or until enough years have passed that you can qualify to file for an additional bankruptcy discharge.

You will have the option of filing for a Chapter 13 bankruptcy before four years have passed since your Chapter 7 discharge, but only if you are looking to reorganize your remaining debts. These remaining debts cannot be discharged for another four years.

Finally, if you are currently receiving ongoing medical care that will be resolved in a matter of months, it is most likely advisable to wait until your course of treatment is complete before filing for bankruptcy. The debts incurred during your treatment can all be included in your bankruptcy filing, and will be eligible for complete forgiveness.

 

Image: “Medical/Surgical Operative Photography” by Phalinn Ooi – licensed under CC by 2.0

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