What Happens to Credit Card Debt and Medical Bills in a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, also called ‘straight bankruptcy’ or liquidation, has the potential to discharge all eligible personal debts, including credit card and medical debts. Debts incurred as a result of medical conditions, often due to uncovered medical bills coupled with the inability to work, are the reason why the dedicated Columbia bankruptcy lawyers at Reed Law Firm, P.A., fight so hard to get their clients the fresh start they deserve.
If you need help getting medical bills and credit card debts discharged, discuss the benefits and drawbacks of filing for Chapter 7 bankruptcy with our experienced South Carolina bankruptcy team today.
Overview of Chapter 7 Bankruptcy Proceedings
Filing for bankruptcy under Chapter 7 means that you’re willing to liquidate all non-exempt assets to pay your debts in exchange for the discharge of all remaining eligible debts. There are alternatives to filing for Chapter 7, such as restructuring or negotiating your debts under Chapters 13 or 11, but sometimes medical bills and credit card debts combined are simply insurmountable. An attorney can help determine the best type of bankruptcy to file for in your case.
If you are eligible to file for Chapter 7 based on your debts and income, the court will appoint a trustee to collect and sell all non-exempt assets. This generally includes homes, cars, jewelry, art, stocks, and bank accounts. After paying secured debts, any remaining funds are distributed among eligible unsecured creditors, including credit card companies and medical providers. Once all your non-exempt assets are distributed, the court discharges the remaining debts. This complete discharge means you have no further legal obligations to the creditors.
Dischargeable Debts: Credit Cards and Medical Bills
Only personal (not business) debts are dischargeable in Chapter 7 proceedings, but this generally includes all medical bills and credit card debts. Additional dischargeable debts include the following:
- Personal loans
- Auto loans
- Student debt (based on financial hardship)
- Utility arrears
- Personal injury judgments
- Some tax debts
Most medical bills and credit card debts, regardless of amount, are completely dischargeable if you follow proper Chapter 7 discharge proceedings. An experienced bankruptcy lawyer can help calculate the benefits and potential costs of liquidation in your case.
Non-Dischargeable Debts and Alternative Proceedings
Certain debts, such as business debts, most student loans, criminal and fraud judgments/fines, child support, and alimony, are not dischargeable. Chapter 7 discharges the personal obligation on secured debts, such as a home or car, but the property lien remains. It’s important to consider all your options, including negotiating lower payments and debt reduction, before filing for Chapter 7. The goal is to free you from continued financial hardship, not leave you in a more difficult situation.
Connect with a Dedicated Columbia Chapter 7 Bankruptcy Lawyer
If you’re overwhelmed by credit card debt and medical bills in South Carolina, the compassionate debt relief attorneys at Reed Law Firm want to help you start fresh. This may mean filing a petition for Chapter 7 liquidation, helping you negotiate your debts outside of court, or finding another more viable bankruptcy plan.
Do not be afraid to contact us to discuss freeing yourself from the financial burden of unmanageable American medical debts. Call (803) 726-4888 or connect with our Columbia, S.C. legal team online to schedule a confidential case consultation.
