Can Bankruptcy Eliminate Medical Debt in Texas?
Medical debt is the leading cause of bankruptcy filings in the United States. In fact, millions of Americans struggle with hospital bills they simply cannot afford to pay. If you are drowning in medical debt in Texas, filing for bankruptcy may provide the relief you need to get back on solid financial ground.
Here is what you should know about how bankruptcy handles these obligations and whether it might be the right option for your situation.
Hospital Bills Are Dischargeable in Bankruptcy
The good news for Texas residents is that medical debt is classified as unsecured debt. This means it receives the same treatment as credit card balances and personal loans during bankruptcy. In a Chapter 7 case, qualifying hospital bills can be completely wiped out through the discharge process. Furthermore, you do not need to repay any portion of discharged balances after your case concludes.
In a Chapter 13 filing, your obligations are included in a structured repayment plan. However, you typically pay only a fraction of what you owe. The remaining balance is discharged when you complete the plan. Consequently, both chapters offer meaningful relief from overwhelming bills.
How These Obligations Differ From Other Debts
Unlike certain debts such as student loans or tax obligations, medical debt does not receive special priority in bankruptcy. It sits at the bottom of the repayment hierarchy. Additionally, there are no restrictions on the amount you can include in your filing. Whether you owe five thousand dollars or five hundred thousand dollars, the bankruptcy court treats these balances the same way.
This makes bankruptcy particularly effective for people whose primary financial burden comes from hospital stays, surgeries, emergency room visits, or ongoing treatment costs. First, you should gather all of your bills and collection notices. Next, consult with a bankruptcy attorney who can review your complete financial picture.
The Impact of Medical Debt on Your Finances
Unpaid medical debt can damage your financial health in several ways. Collection agencies may pursue you aggressively with phone calls and letters. Additionally, balances that go to collections can appear on your credit report and lower your score significantly. Some creditors may even file lawsuits to garnish your wages or place liens on your property.
Filing for bankruptcy triggers an automatic stay that immediately stops all collection activity. This protection applies to hospitals, collection agencies, and any other party trying to collect payment from you. As a result, you gain breathing room to address your finances without constant pressure from creditors.
Qualifying for Bankruptcy With Medical Debt
To file Chapter 7 bankruptcy in Texas, you must pass the means test. This test compares your income to the median income for your household size in Texas. If your income falls below the median, you automatically qualify. However, even if your income is above the median, you may still qualify after deducting allowable expenses.
Chapter 13 does not require a means test. Instead, you must have regular income and debts below certain limits. According to the United States Courts, Chapter 13 allows you to propose a repayment plan lasting three to five years.
Take Action Against Overwhelming Bills
If medical debt is consuming your finances and affecting your quality of life, you do not have to face it alone. An experienced bankruptcy attorney can help you understand your options and determine the best path forward. Contact the Law Office of Jeremy T. Wood today to schedule a consultation and learn how bankruptcy can provide the fresh start you deserve.