Medical bills are one of the leading causes of bankruptcy. Many people file for bankruptcy due to medical bills, even if they have health insurance. The cost of healthcare in the US is very high and often leads to bankruptcy for many people. Medical expenses are usually discharged when a person files for bankruptcy.
Medical debts can be discharged when you file for bankruptcy. But it is considered better to file for bankruptcy as a last resort. Filing for bankruptcy due to medical debt can be avoided through alternatives like suggesting and negotiating a payment plan with your healthcare provider.
This is done to avoid the claim going to collections where you do not have freedom over your funds. When you file for bankruptcy, the trustee ensures that all the creditors are repaid as soon as possible. Discharge of medical debt mostly depends on the amount of debt and the type of bankruptcy you filed for.
Medical bills are considered to be unsecured nonpriority debts in bankruptcy and can be discharged easily. In the case of chapter 7 bankruptcy, the trustee sells all your assets to repay creditors. At the end of that process, the medical bill is usually discharged even if you didn’t raise any funds to pay the healthcare provider.
However, there are downsides to filing Chapter 7 bankruptcy because the trustee has the authority to sell your property. Losing property can lead to losing your home or other land you may own. Hence chapter 7 bankruptcy is only for those who are critically low on funds.
In the case of chapter 13 bankruptcy, you may have to repay medical bills over the course of time from your income. This helps build a good relationship with your healthcare provider because you are at least repaying some of the medical bills.
If you are only facing medical debt, filing for bankruptcy is not the best option for you. Alternatives for avoiding bankruptcy filing include debt management plans, consolidating your debt, raising money, negotiating with the health provider, etc.
Non-dischargeable debts are those which are not ruled out when you file for bankruptcy proceedings. Often when a person files bankruptcy in court, many debts are discharged, and the person is no longer obligated to pay those debts. However, some debts need the creditor to challenge your discharge during bankruptcy to make it completely non-dischargeable.
The process usually includes the court making the decision after listening to both parties, i.e., the person filing for bankruptcy and the creditor. If the court disagrees with the creditor, your debt can be discharged.
There are many conditions under which your debts are non-dischargeable after filing for bankruptcy. This includes debts due to fraudulent acts, debts from marital settlement or divorce decrees, debts from embezzlement, a breach of fiduciary responsibility, larceny, or debts from willful or malicious acts to another person.
Most of the non-dischargeable debts arise from acts of fraud or unlawful practices. Other types of non-dischargeable debts include payment owed for personal injury to a person by the debtor.
Moreover, creditors have the right to object to the discharge of debts. If the court agrees with the creditor, the debts become non-dischargeable. These include purchases of luxury items made by the debtor that were acquired within 90 days of filing for bankruptcy. However, the debtor can discharge these debts by assuring the court that they will repay the creditor and that the purchases were not luxury items.
Other situations in which the debts become non-dischargeable are when the debtor does not have proof or record of their finances and property settlements to show to the creditor. The court declares the debts incurred from creditors non-dischargeable when you cannot account for your missing assets due to a lack of records.
Furthermore, debts can also become non-dischargeable if you file for bankruptcy too often. You cannot get discharges on debts if you file for bankruptcy within eight years after you filed your first bankruptcy case. Your previous bankruptcy filing can serve as grounds for your latest debts to be discharged or not. This depends on the type of bankruptcy and the settlements of your last bankruptcy.
Bankruptcy is a challenging process for anyone and can make things very complicated when it comes to clearing debts and paying taxes. Filing for bankruptcy does not necessarily mean that your taxes or tax debts will be discharged.
Filing for bankruptcy means that you no longer have control over your own affairs, and a trustee is appointed to oversee them. Depending on the type of bankruptcy filing, you may receive a discharge on your overdue debts or a tax refund that will belong to your estate.
There are a few things to remember if you are filing for bankruptcy and want to keep your tax refund. Under Chapters 7 and 11 bankruptcy, if you get a tax refund after filing for bankruptcy, the tax refund will not be a part of your estate. That refund will most probably be used by the trustee to pay off your debts.
Most people file for Chapter 7 bankruptcy because it eliminates most of their tax debts, but you may lose your first tax refund.
However, if you get a tax refund prior to filing bankruptcy, it will be a part of your estate, but as soon as you file for bankruptcy after receiving the tax refund, the money will be used by the trustee to pay the creditors.
Taxes are often considered non-dischargeable, but after filing for bankruptcy, the priority shifts towards paying other important debts, e.g., child support. Tax payments can be discharged under some conditions, e.g., the debt should be at least three years old, you should not have a history of tax evasion, the IRS should not have a lien over your property, etc.
Filing bankruptcy under chapter 13 allows you to keep your tax refund and devise a repayment plan with your trustee. The repayment plan can include or exclude the tax refund amount according to your monthly income.
During the provision of a bankruptcy case, you cannot accrue any new debts that you are unable to pay. Doing that leads to the court dismissing your current bankruptcy. There should be no prior cases of fraudulent refunds that can cause complications in your case.
Parents are legally bound to provide for their children. It is their responsibility allocated to them by the court, and the court makes sure that child support is being paid by both parents to financially support their children. However, sometimes, the parents are unable to pay child support because of bankruptcy.
Bankruptcy can be due to many reasons, e.g., loss of a job, a lower-paying job, exhausted funds, or other reasons. Under such circumstances, it becomes difficult for the parent to pay child support.
In case of increased debts and reduced income, you can file for bankruptcy in court. However, this does not relieve you from paying child support. Child support is a priority debt, and you have to pay your overdue payments. Being bankrupt does not mean that you stop paying child support.
After filing for bankruptcy, you have to notify the Child Support Division to come up with possible solutions to your problem. Usually, child support is paid first and is prioritized as compared to other debts, such as tax obligations.
Child support is not dischargeable, but you can modify the amount of financial support by coming to a mutual agreement with the other parent. This usually results in lowering the amount. However, this process does not strike off any overdue payments in case you have missed any.
The relationship between child support and bankruptcy is complex because, despite valid reasons, you cannot simply back off. If you stop paying child support, the court will get an attorney to use different methods to enforce child support responsibilities.
The best method in such a scenario is to reduce your unsecured debts and coordinate with the other parent to stay out of any enforcement laws. Make sure to seek help from a professional. They will help you find some debt repayment plans that pay off a portion of your debt so you can spend more on child support.
Lastly, any income you earn after filing for bankruptcy is not part of the bankruptcy estate. That income can be used to pay off child support arrearages under child support obligations.
When you file for bankruptcy, the court may decide to eliminate certain debts by discharging them. The debts that cannot be discharged by the court have to be paid. Filing for bankruptcy does not automatically discharge your student loans. If you wish to have your student loans discharged, you will have to file a separate motion with the bankruptcy courts.
Contrary to popular opinion, student loans can be discharged in bankruptcy. It may be difficult to discharge student loans but it is not impossible. In fact, the department of education has taken steps to ensure that this is possible.
It is true that when it comes to student loans it might be more difficult to discharge them than other types of secured debt. When it comes to student loans unless you can show that the payment of the loan poses an undue hardship on your family, your defendants, and you, it cannot be discharged.
It is difficult to meet the requirements for undue hardships and it rarely happens but it is possible. The courts use several methods to test if the person has faced undue hardship. They regularly use Brunner test to evaluate if your claim is valid. The other test that can be used is the totality of circumstance test.
When it comes to the totality of circumstance test, the court will consider your past, present, and future resources. They will also consider reasonably necessary living expenses and other relevant facts and circumstances.
For the Brunner test, you will have to file a separate motion with the bankruptcy courts. Thereafter you will have to appear in in front of a judge to explain your hardship. You must show that; you made efforts to repay the loans through past payments or arranging for payments, you are unable to maintain a minimal standard of living for yourself and your family, and that the circumstances that exist that are stopping you from repaying the loan, are unlikely to improve. However, it is up to the court to decide if you meet the undue hardship standard. If you are able to prove that you face undue hardships, your student loans will be discharged.
