Medical Debt Attorney in El Dorado, Arkansas

Medical debt can cripple any family’s financial situation. According to 2021 data from the Urban Institute, roughly 37% of Arkansas families report having medical debt. Every single individual—every single family—deserves to get their finances back on track. 

At Rushing Law Firm, PLLC, our team is here to help. We strive to make things simple for our clients as we focus on striving toward positive outcomes together. Ultimately, our goal is to make medical debt less intimidating for El Dorado residents and anyone else throughout the state of Arkansas. Set up a consultation to start getting your family’s finances back on track today. 

Filing for Medical Bankruptcy 

Clients often ask us, “Will filing for bankruptcy eliminate my medical debt?” The short answer is: it depends, but typically yes. Filing for medical bankruptcy can eliminate some types of medical debt. Still, it does depend on the specific circumstances of the case and the type of bankruptcy filed. 

Chapter 7 bankruptcy is the most common type used to discharge medical debt. In Chapter 7 bankruptcy, most unsecured debts, including medical debt, can be discharged. However, not all medical debts, such as those incurred fraudulently or through willful or malicious conduct, are eligible for discharge.

Chapter 13 bankruptcy is another type of bankruptcy that can be used to manage medical debt. In Chapter 13 bankruptcy, a repayment plan allows debtors to pay back debts over three to five years. Sometimes, the amount of medical debt debtors have to repay can be reduced or eliminated, depending on the debtor’s income and expenses. 

Qualifying for Medical Bankruptcy  

Chapter 7 

To qualify for Chapter 7 bankruptcy and discharge medical debt, debtors must meet certain eligibility requirements, including a means test determining whether their income is low enough to qualify. The means test compares the debtor’s income to the median income for households of the same size in the debtor’s state. If their income is below the median income, they may be eligible for Chapter 7 bankruptcy. If the debtor’s income is above the median income, they may still be eligible if they can pass a more complex means test taking into account expenses and other factors. 

In addition to meeting the income requirements, debtors must also meet certain other eligibility criteria, such as completing credit counseling within six months before filing for bankruptcy and not having filed for bankruptcy within the past eight years. 

Additionally, to qualify for discharge of medical debt in Chapter 7 bankruptcy, the medical debt must be unsecured, meaning it is not tied to any collateral or security. In general, most medical debt is unsecured. 

Chapter 13 

To qualify for Chapter 13 bankruptcy and manage medical debt, debtors must meet certain eligibility requirements, including having a regular source of income and unsecured debts that are less than the amounts dictated by the bankruptcy code. 

In Chapter 13 bankruptcy, debtors create a repayment plan that allows them to pay back some or all debts over three to five years. The monthly amount debtors pay is based on income and expenses and is designed to be manageable and affordable. 

To include medical debt in a Chapter 13 repayment plan, the medical debt must be unsecured. It’s vital to reach out to a bankruptcy attorney to help you fully understand your bankruptcy options. 

How Medical Debt Can Affect Your Credit Score 

Medical debt can significantly impact a debtor’s credit score if it is not managed properly. If there are unpaid medical bills or medical bills that have been sent to collections, this can result in negative information being reported to the credit bureaus. 

Late payments or missed payments on medical bills can lower credit scores and may stay on credit reports for up to seven years. If your medical debt goes to collections, this can also result in a collection account being added to credit reports, which can significantly negatively impact the debtor’s credit score. 

Pros and Cons of Filing for Medical Debt Bankruptcy 

Here are the potential pros and cons of filing for medical debt bankruptcy: 

Pros: 

• Filing for bankruptcy may allow debtors to discharge medical debt, which can provide relief from overwhelming medical bills and help them start fresh financially. 

• When filing for bankruptcy, an automatic stay is put in place that stops most creditors from pursuing collection actions against debtors, which can provide some temporary financial relief. 

• While bankruptcy will impact credit scores, it can also provide a fresh start and allow debtors to rebuild credit over time. 

Cons: 

• Filing for bankruptcy can have a significant negative impact on credit scores. It can stay on credit reports for up to 10 years. This situation can make it more difficult to obtain credit, such as loans or credit cards, in the future. 

• Filing for bankruptcy can involve legal fees, which can add to the overall debt load. 

• Depending on the type of bankruptcy filed for, the debtor may be required to liquidate certain assets to pay off debts. 

Before making a decision, it’s a good idea to consult with an experienced bankruptcy attorney who can help debtors understand their options and guide them through the bankruptcy process. 

Considerations Before Filling for Medical Bankruptcy 

Before filing for medical bankruptcy, there are several important considerations to keep in mind: 

• Explore other debt management options, such as credit counseling to develop a plan to pay off debts over time. 

• Debtors must understand the impact on credit scores, possibly limiting their options for a future credit application. 

• Debtors must determine if they qualify for medical bankruptcy. It’s important to consult with an experienced bankruptcy attorney to determine if they qualify. 

• Debtors must understand the types of bankruptcy to choose the one best for their situation. 

Consult with a medical debt attorney in order to start navigating the legal process.