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san antonio bankruptcy attorneyEven though legally, there’s no such thing as a medical bankruptcy, many bankruptcies are caused by medical problems. Here’s a Q&A about these.  

In the last two weeks, we’ve written about health insurance. Two weeks ago, we discussed the six months of free health insurance provided by the recent American Rescue Plan Act.  Last week we got into the broader topic of health insurance and bankruptcy. Today we broaden it out even more with a Q&A about medical bankruptcy. 

What is Medical Bankruptcy, Legally?

Although the phrase is thrown around a lot, legally, there is no such thing. The legally designated types of bankruptcy are labeled according to their Chapters in the U.S. Bankruptcy Code. Chapter 7, the so-called “straight bankruptcy,” and Chapter 13 “adjustment of debts,” are the most common forms of personal bankruptcy. Both Chapter 7 and 13 can deal effectively with medical debts and other financial problems arising from medical events. 

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TX bankruptcy lawyerThere is more than one type of bankruptcy, although Chapter 7 and Chapter 13 bankruptcies are the most common. In a Chapter 13 bankruptcy, your attorney and a team of other professionals are able to help you develop a repayment plan to pay back your debts. The repayment plan lasts for three to five years, depending on a variety of circumstances. Chapter 13 bankruptcies can be beneficial to individuals because it allows you to keep certain assets, such as your vehicle or your home. In a Chapter 13 bankruptcy, certain debts must be repaid before other debts.

Priority Debts

Priority debts are exactly what they sound like -- priority over other debts. These debts must be included in any repayment plan you enter and the plan must make sure that your priority debts are paid off first and in full. Typically priority debts include:

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A creditor’s rights over you in either Chapter 7 or 13 vastly increase if it has a security interest. Now’s the time to find out for sure.

Reaffirmation vs. Cramdown

The last four blog posts have compared Chapter 7 reaffirmation with Chapter 13 cramdown of a secured debt.

With reaffirmation you keep the vehicle or other collateral but continue to owe the debt. Usually you owe the full debt, and the monthly payments remain the same. But sometimes the debt and monthly payments can be reduced if the collateral is worth less than the balance.

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Posted on in Chapter 7

In a Chapter 7 case all or most “general unsecured debts” get “discharged”—legally written off. That’s one of the big benefits of Chapter 7.

Last time we said there are two kinds of unsecured debts, “priority” and “general unsecured”:

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You can file a Chapter 13 case if you are an “individual,” have “regular income,” and don’t owe too much.


If you qualify, a Chapter 13 case is an extraordinarily powerful tool for dealing with certain kinds of debts. For example:

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