Can Medical Debt Be Included in Bankruptcy in Florida?

If you’re struggling with overwhelming medical debt, you may be considering bankruptcy as an option to get financial relief. Many people face unexpected medical expenses that can lead to serious financial hardship, and bankruptcy might be a viable way out. But can you include medical debt in your bankruptcy in Florida? The answer is yes—and in this blog post, we will explain how the process works, what your options are, and the impact on your financial future.

Understanding Medical Debt and Bankruptcy in Florida

Medical debt is one of the leading causes of financial strain for individuals and families all across the US, including here in Florida. Medical debt is categorized as an unsecured debt, meaning it is not tied to any collateral, like a house or a car. Because of this, medical debt is treated much like other forms of unsecured debt in bankruptcy, which means it can often be discharged, giving you a fresh start.

When you file for bankruptcy, you have the opportunity to include medical debt, along with other unsecured debts, such as credit cards and personal loans. Let’s explore the two main types of bankruptcy available to individuals in Florida: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy: Discharge Your Medical Debt

Chapter 7 bankruptcy is often referred to as a “liquidation,” and it’s the most common type used for wiping out unsecured debts like medical debt. When you file for Chapter 7 in Florida, you are attempting to

• Discharge Medical Debt: Medical debt can be entirely eliminated. Once your case is approved by the bankruptcy court, you are no longer legally obligated to pay the medical bills that were included in the filing.
• Pass a Means Test Requirement: To qualify for Chapter 7 bankruptcy, you must pass a means test to determine if your income is low enough. The means test compares your household income to the median income for households of similar size in Florida. If you pass, you can proceed with Chapter 7 and potentially discharge most or all of your medical debt.
• Property Exemptions: Florida has generous homestead exemptions, which means you may be able to protect your home during the bankruptcy process, depending on the equity in the property.

Chapter 7 bankruptcy can be an effective way to get rid of medical debt, especially if you have limited assets and income.

Chapter 13 Bankruptcy: Reorganize Your Medical Debt

If you don’t qualify for Chapter 7 or have other reasons for choosing an alternative, Chapter 13 bankruptcy might be the better fit. Here’s how it works in Florida:

• Debt Repayment Plan: Chapter 13 allows you to create a repayment plan that typically lasts between 3 to 5 years. In this plan, you’ll pay back a portion of your medical debt, as well as other unsecured debts, based on what you can afford.
• Consolidated Payment: Medical debt, credit card debt, and other eligible obligations are combined into one affordable monthly payment. After completing the repayment plan, any remaining unsecured debt, including medical debt, is discharged.
• Protection from Collections: Once you file for Chapter 13, automatic stay provisions go into effect. This means that collection efforts, including phone calls and wage garnishments, must stop immediately.

For people with a steady income who may need more time to pay off their debts, Chapter 13 offers an opportunity to manage debt while protecting assets like your home or car.

What Happens to Medical Debt in Bankruptcy?

Whether you choose Chapter 7 or Chapter 13, your medical debt can be included in your bankruptcy filing. Here are some key points to keep in mind:

1. Automatic Stay Protection: As soon as you file for bankruptcy, an automatic stay is issued by the bankruptcy court. This immediately stops creditors from trying to collect the medical debt, preventing actions like lawsuits, wage garnishments, and collection calls.
2. Debt Discharge: In Chapter 7, most of your unsecured debts, including medical bills, can be discharged. In Chapter 13, the repayment plan helps you pay back what you can, and the rest is wiped away once the plan is complete.
3. Impact on Credit: Both Chapter 7 and Chapter 13 bankruptcy will have an impact on your credit score. Chapter 7 remains on your credit report for ten years, while Chapter 13 stays for seven years. However, discharging overwhelming medical debt can allow you to rebuild your financial standing without the burden of unaffordable bills.

Will I Lose My Property if I File for Bankruptcy in Florida?

Florida has some of the most generous bankruptcy exemptions in the country. The homestead exemption allows you to protect equity in your home as long as you meet certain residency requirements. In most cases, other personal property, such as cars, retirement accounts, and household items, can also be exempt from liquidation, meaning you can keep them while discharging your medical debt.

If you’re filing for Chapter 13, you won’t lose any property, since this type of bankruptcy allows you to create a repayment plan instead of liquidating assets. This is an important consideration for people who have significant assets but are still struggling with medical bills.

Medical Debt Relief in Florida: Getting Started

Medical debt can feel like an insurmountable burden, but bankruptcy laws are designed to help people get a fresh start. In Florida, both Chapter 7 and Chapter 13 bankruptcies allow you to address your medical debt, depending on your income, assets, and personal situation.

If you’re struggling to keep up with medical bills, consider a free consultation to discuss your options. By taking action now, you can regain control of your finances and move forward with a fresh start.

FAQs About Medical Debt and Bankruptcy in Florida

1. Can I include all of my medical debt in a Florida bankruptcy?
   Yes, you can include all of your medical debt when filing for bankruptcy in Florida, either under Chapter 7 or Chapter 13.
2. What happens to my medical debt if I file Chapter 7?
   Chapter 7 bankruptcy can discharge most or all of your unsecured debts, including medical debt, giving you a clean slate.
3. Will filing for bankruptcy stop collections for medical bills?
   Yes, filing for bankruptcy initiates an automatic stay, which stops creditors from pursuing collection efforts for your medical bills and other eligible debts.
4. Can I protect my home if I file for bankruptcy in Florida?
   Florida’s homestead exemption allows you to protect the equity in your home, depending on the value and how long you have owned it.

Conclusion

Filing for bankruptcy is a significant decision, but it can offer a path to financial freedom for those struggling with medical debt. In Florida, bankruptcy laws provide options to either discharge or reorganize these debts, allowing you to regain stability and move forward. Remember, taking the step to explore bankruptcy can be an important move toward reclaiming control over your finances and creating a more secure future.

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