If a debtor has substantial medical debt but knows that she will incur additional medical expenses (or other debts) soon, it may make sense to postpone filing for bankruptcy. The reason is that a bankruptcy case will only discharge those debts incurred as of the date the case was filed. By postponing the filing until after the additional debts are incurred, the full list of debts can qualify for discharge and more complete relief can be obtained.
People are often anxious to get their debt discharged. It weighs heavily on them, and when they decide to do something about it, they are often tempted to want to move quickly to get a bankruptcy case filed. Timing is important, though, and waiting until additional expected debts are incurred may be the best strategy.
The debtor should be careful, however, to ensure that a prior bankruptcy will not prevent a discharge. If a prior discharge was received in a Chapter 7 case, the debtor must wait eight years from the date of the previous filing before another Chapter 7 discharge can be obtained from the court.
Seeking Chapter 13 relief? The debtor must wait four years to obtain a discharge, but a debtor may file a Chapter 13 before that date to begin a repayment plan.
If a prior Chapter 13 discharge was received, the debtor must wait six years from the date of filing to file a Chapter 7 (unless 100% of the unsecured debts were paid in the prior case or court permission of a reduced amount was granted). However, to receive another Chapter 13 discharge, the debtor need only wait two years before filing again.
Remember: The effective date is the date the prior bankruptcy case was filed, not the date the discharge order was entered.
Keep in mind that only debts incurred as of the date of filing are eligible for discharge. Any debts incurred after the date of filing are not included in the schedules and are not part of the bankruptcy case. For this reason, if the debtor continues to incur medical debts, she should consider holding off on filing the bankruptcy case until the medical debts have been fully incurred. Failing to do so will result in the debtor being liable for the additional debts and not being able to discharge them.
Lastly, the debtor should be careful if a claim has previously been filed for public assistance with medical debt. In some limited cases, the filing of a bankruptcy case before a decision regarding public assistance is obtained could result in claims by the trustee or public aid administration for improper or fraudulent actions by the debtor.
Bankruptcy is a highly technical area of law. The rules are many and vary depending on many factors. It pays to get good advice and to understand the rules completely before jumping in. Bankruptcy relief is a powerful tool for anyone who is burdened with crushing debt, and care should be taken to make effective use of that tool. No one wants to go through bankruptcy only to find that some of the debt cannot be discharged, and no further relief is not available in the foreseeable future.
- Lawrence W. Lobb
- Drendel & Jansons Law Group
- 111 Flinn Street
- Batavia, IL 60510
- (630) 406-5440
- (630) 406-6179 fax
For more articles on Bankruptcy topics, see the Drendel & Jansons Bankruptcy Blog Page.
For Bankruptcy resources, see the Drendel & Jansons Bankruptcy Resource Page.