Will Bankruptcy Get Rid of Medical Debt in Phoenix?
Medical emergencies can strike without warning, and unfortunately, the financial aftermath often lingers long after the health crisis has passed. For many Phoenix residents, soaring hospital bills, out-of-pocket expenses, and gaps in insurance coverage lead to overwhelming medical debt. In these situations, a question often arises about whether bankruptcy will get rid of medical debt in Phoenix.
The answer is yes: bankruptcy can eliminate medical debt. But it’s not always as simple as it sounds. You’ll want to take into account the difference between Chapter 7 and Chapter 13 filings and what you should consider before pursuing this path to debt relief in Phoenix.
Understanding Medical Debt and Bankruptcy
Medical debt refers to outstanding balances owed to healthcare providers for services such as surgery, ER visits, prescriptions, diagnostic tests, and more. Deductibles, copays, and denied claims can quickly snowball into insurmountable bills, even with insurance.
When those debts become unmanageable, bankruptcy becomes an option worth considering. The good news? Medical bills are considered unsecured debt, just like credit card balances or personal loans. This means they can often be wiped out in a bankruptcy filing.
But there are nuances. Not all bankruptcies are the same, and not everyone qualifies for the same type of relief.
Chapter 7 Bankruptcy for Medical Debt
Chapter 7 bankruptcy is often the most straightforward route for eliminating medical debt in Phoenix. It’s sometimes referred to as liquidation bankruptcy, although most filers don’t actually lose personal property thanks to exemptions under Arizona law.
How Chapter 7 Works
- You file a petition with the bankruptcy court.
- Your assets are assessed, but most essential ones (like your home and vehicle) are typically protected.
- Unsecured debts, including bankruptcy medical bills, are discharged (wiped out) within a few months.
The following are some key benefits of Chapter 7:
- Fast resolution: Most Chapter 7 cases wrap up in 4-6 months.
- Complete discharge of medical debt: There’s no cap on the amount of medical debt that can be eliminated.
- Fresh start: You emerge without the burden of those crushing bills.
To qualify for Chapter 7, you must pass the means test, which looks at your income compared to the median in Arizona. If your income is too high, you may have to consider Chapter 13 instead.
Chapter 13 Bankruptcy and Medical Debt
If Chapter 7 isn’t an option, Chapter 13 bankruptcy can still offer substantial debt relief in Phoenix, though it works differently.
How Chapter 13 Works
- You propose a 3- to 5-year repayment plan based on your income.
- You make monthly payments to a bankruptcy trustee.
- After completing the plan, remaining unsecured debts (including medical bills) may be discharged.
This type of bankruptcy is often better for those who:
- Have higher incomes.
- Are behind on mortgage or car payments and want to keep their property.
- Have assets they want to protect that would be at risk in a Chapter 7 filing.
While not as quick or absolute as Chapter 7, Chapter 13 medical debt discharge can still provide meaningful relief over time.
Will Bankruptcy Get Rid of All My Medical Bills?
In most cases, bankruptcy medical bills are fully dischargeable in both Chapter 7 and Chapter 13. However, there are a few things to keep in mind:
- Fraudulent charges: If the court determines that you obtained medical services through fraud, that debt may not be discharged.
- Recent charges: If you racked up massive medical bills just before filing, the court might scrutinize them more closely.
- Co-signed debt: If someone else co-signed a loan or medical credit line, your discharge won’t relieve them of responsibility.
Medical Debt and the Cost of Care in Phoenix
Healthcare costs continue to rise, and with one in five Arizonans struggling to pay medical bills, bankruptcy remains a common tool for relief. Whether it’s due to a chronic condition, emergency surgery, or a high-deductible plan, eliminating medical debt through bankruptcy is a well-established legal option.
When to Consider Bankruptcy for Medical Debt
Bankruptcy isn’t the first line of defense—it’s a last resort. Before filing, it’s wise to:
- Negotiate directly with hospitals or billing departments.
- Seek financial assistance or charity care (many Arizona hospitals offer it).
- Explore debt settlement or consolidation.
If none of these work and your financial situation is deteriorating, bankruptcy medical bills relief may be the smartest move.
Signs it might be time:
- You’re choosing between paying rent and paying medical bills.
- Your credit cards are maxed out from trying to cover healthcare costs.
- Collection calls and lawsuits are starting.
- Your credit is already suffering, and you see no realistic way out.
Life After Medical Debt Bankruptcy
Many people fear that filing for bankruptcy will destroy their credit forever. The reality? It’s a hit, but it’s not permanent. In fact, many people see their credit scores rebound within 12 to 18 months, especially when they no longer have massive unpaid balances dragging them down.
With responsible use of credit and steady income, you can rebuild. Plus, the relief from eliminating medical debt is often immediate. No more collectors. No more juggling bills. Just a clean slate.
Talk to a Phoenix Bankruptcy Lawyer Today
Bankruptcy is not a decision to take lightly, so consulting a qualified debt relief Phoenix attorney is the best way to get personalized guidance.
If you have any questions about Arizona bankruptcy laws, talk to Cy Hainey at Hilltop Law Firm today. Cy is a bankruptcy attorney who’s been helping people in Phoenix get debt relief for over a decade.
Call (602) 466-9631 to schedule a FREE consultation with our Phoenix bankruptcy lawyer today. If you’re interested in a free Zoom meeting, someone from the Hilltop Law Firm office will be happy to help you set up your virtual meeting in advance.