The Affordable Care Act has brought some financial relief to families who face serious illnesses. Nevertheless, medical bills still cause about two-thirds of bankruptcies in Georgia. Even if the debtor has health insurance, the copays and deductibles alone can be financially crippling, especially in chronic illness situations. Fortunately, bankruptcy takes care of medical bills. These debtors can either erase them through bankruptcy or set up a long-term repayment plan.

You can file bankruptcy on more than medical bills. Chapter 7 erases most unsecured debts, including medical bills, in only a few months. Chapter 13 gives families up to five years to erase unsecured debts, and secured debt delinquency, on their own.

An Athens bankruptcy lawyer is a pivotal part of the process. Only an attorney can give you solid legal advice about your different bankruptcy options. Furthermore, only a lawyer knows how to prepare and present the paperwork in a way that upholds your best interests. Finally, only an Athens bankruptcy attorney can fully represent you during this entire legal process.

The Automatic Stay

Typically, doctors turn over unpaid accounts to debt collectors after just a couple of months. Because the Supreme Court has gutted some of the consumer protections in the Fair Debt Collection Practices Act, these debt buyers are now more aggressive than ever. They routinely use harassing tactics to collect these bills. And, in many cases, they do not hesitate to go to court. With a judicial order in hand, they can obtain a judgement, file a lien, and even garnish your wages.

Bankruptcy’s Automatic Stay immediately stops all this activity. Section 362 of the Bankruptcy Code also prohibits other forms of adverse action, such as repossession and foreclosure. Generally, creditors can only bypass the Automatic Stay if the debtor threatens the collateral in a tangible and immediate way. An Athens bankruptcy lawyer can stop such action based on lesser things, like being behind on payments.

The Automatic Stay has a special applicability in terms of medical bills. Doctors routinely drop patients who owe money. The Automatic Stay prohibits such action.

Debt Reaffirmation

In most cases, both Chapter 7 and Chapter 13 give debtors the option to voluntarily repay medical bills or allow the judge to discharge them. That’s a choice which is only available in bankruptcy.

Chapter 7 debtors often elect the reaffirmation option on secured debts, such as vehicle payments, and executory contracts, such as internet service agreements. Reaffirmation agreements do more than keep these lines of credit open. They also give an Athens bankruptcy attorney a chance to renegotiate the terms. Creditors are under considerable pressure to make favorable deals in these cases. They know that if they do not do so, the debtor will walk away from the obligation, leaving them with little or nothing.

In a Chapter 13, medical bills usually are part of the protected repayment plan. Debtors make small monthly payments for three or five years on outstanding medical bills. At the end of that period, any remaining medical bills are discharged.

Debt Discharge

Regardless of their size, medical bills are usually standard unsecured debts. Therefore, they are automatically dischargeable at the end of a Chapter 7 or Chapter 13 bankruptcy.

“Discharge” means the judge eliminates the legal obligation to repay the debt. However, the debt itself remains. As such, the collateral consequences of that debt remain as well.

In terms of medical bills, a service cutoff is usually the most worrisome collateral effect. The Automatic Stay usually prohibits doctors from taking such action while the bankruptcy is pending. When the judge is about to close the bankruptcy, most Athens bankruptcy lawyers reach out to medical providers and negotiate with them for continued service.

Alternatively, the debtor could execute a reaffirmation agreement early on in the bankruptcy and agree to keep making payments on a past-due account. In these cases, an Athens bankruptcy attorney usually reaches out to the medical provider before filing. That way, the doctor’s accounting department does not receive any unpleasant surprises.

Consult a Seasoned Bankruptcy Lawyer in Athens Right Away

You can file bankruptcy on medical bills. For a free consultation with an experienced bankruptcy attorney in Athens, contact Morgan & Morgan, Attorneys at Law, P.C. at (706) 843-2905. We routinely handle matters in Clarke County and nearby jurisdictions.