Medical Bills and Bankruptcy in Yakima, Washington

You may not know this, but medical expenses are a leading cause of financial distress in the US. It often forces many to consider bankruptcy as a means of relief. For residents of Yakima, Washington, gaining an understanding of how medical bills interact with bankruptcy law is important to successfully navigate this process.

Medical debt has been listed as one of the most common reasons a person chooses to file for bankruptcy. According to studies, the majority of bankruptcy filers cite medical bills as a big contributing factor. Yakima, a city with a mix of both urban and rural populations, faces unique challenges regarding healthcare costs and access.

You might find higher out-of-pocket costs even with insurance, which can lead to mounting medical bill debt. In cases where your insurance doesn’t cover certain treatments you need or when you aren’t insured at all, the financial burden of these bills can become even more severe. Combine all this with lost income due to an illness, and you’ll see how quickly medical debt can spiral out of control.

When your medical bills become unmanageable, bankruptcy does offer a solution. There are two primary types available to residents of Yakima, Washington: Chapter 7 and Chapter 13.

Otherwise known as liquidation bankruptcy, Chapter 7 is for those with limited income and assets. Under this bankruptcy type, you can discharge unsecured debts, including medical bills, credit card debt, and personal loans.

You will need to pass a means test to qualify. This determines your eligibility based on income relative to the median income in Washington. You may also need to liquidate non-exempt assets to pay off your creditors. However, Washington state does exempt certain assets like your home or car. Finally, most medical debt is fully discharged, leaving you with a fresh financial start.

This is known as the wage earner’s bankruptcy because it is meant for those with a steady income who want to repay their debts over a specified amount of time. The debt is restructured into a three-to-five-year repayment plan based on the amount of your disposable income. Medical bills are included in this and often also come with reduced balances. Unlike Chapter 7, Chapter 13 allows you to retain all of your assets while repaying your creditors.

Several federal statutes and regulations govern how medical debt is treated in a bankruptcy case.

This federal law protects you from abusive or unfair debt collection practices. Under the FDCPA, medical debt collectors are prohibited from harassing you or misrepresenting the amount you owe.

The US Bankruptcy Code outlines the actual legal framework for bankruptcy filings, including:

• Automatic Stay: Once you file for bankruptcy, your creditors must cease collection efforts, including those for any medical debt you may have.
• Dischargeable Debt: Medical bills are considered unsecured debt, which makes them eligible for discharge under both Chapter 7 and Chapter 13 bankruptcy.

The ACA has provisions designed to reduce medical debt. For example, they cap your out-of-pocket expenses and expand Medicaid eligibility. However, while this may help mitigate future debts, they don’t address any of your existing liabilities.

Washington state has specific laws that interact with federal bankruptcy statutes to protect you:

You can protect up to $125,000 of equity in your primary residence under the state’s homestead exemption. This ensures that filing for bankruptcy does not result in the loss of your home (RCW 6.13.030).

State law limits the amount creditors can garnish from your wages, providing you with protection when you find yourself struggling to pay those medical bills (RCW 6.27).

Washington has implemented consumer protection laws (RCW 70.54.470) that require transparency in medical billing and prohibit certain aggressive collection tactics.

Filing for bankruptcy can prove to be a complicated process and even challenging if you don’t have the knowledge and expertise needed to navigate everything. To ensure you adhere to all legal requirements and everything is done properly, consider following these steps:

Start by gathering all of your medical bills and other debts to assess your total liabilities. When doing this, review your income, expenses, and assets to determine which type of bankruptcy fits your circumstances and would be best for your situation.

Consulting a knowledgeable Yakima-based attorney is a good step to take and helps ensure you understand local regulations and exemptions.

Federal law requires that you complete an approved credit counseling course within 180 days before filing for bankruptcy.

Now is the time to prepare and file the necessary paperwork, including detailed information about your debts, income, and assets. Pay the required filing fees or request a fee waiver if eligible.

This mandatory meeting allows creditors to ask questions about your financial situation.

After filing for bankruptcy, you also need to complete a debtor education course to receive a discharge of your debts.

While bankruptcy can provide relief, it’s worth exploring alternatives:

• Negotiate With Your Healthcare Providers: Many hospitals and clinics in Yakima offer payment plans or financial assistance programs for those unable to pay their bills in full.
• Consider Debt Settlement: This involves negotiating with creditors to reduce the total amount owed. However, this can impact your credit score and may result in taxable income for forgiven debt.
• Find Nonprofit Credit Counseling: Credit counseling agencies can help you create a manageable budget and negotiate repayment plans with creditors.
• Look Into the Washington Charity Care Program: Under Washington law, hospitals must provide free or discounted care to low-income patients who meet eligibility criteria.

Filing for bankruptcy is a big decision with long-term implications, so you want to take your time and learn as much as you can about the process and what it entails.

• Credit Score: Chapter 7 bankruptcy remains on your credit report for 10 years, while Chapter 13 stays for 7 years. However, you will find that rebuilding your credit after bankruptcy is possible through responsible financial habits.
• Emotional Relief: Yes, bankruptcy can certainly be stressful, but it can also provide immense relief by eliminating overwhelming debts and stopping creditor harassment.
• Fresh Financial Start: By discharging medical bills and other unsecured debts, bankruptcy allows you to rebuild your financial future.

Medical debt can prove to be confusing and stressful, especially if you are also considering bankruptcy as a solution. To help clear up some of the complexities involved, here are answers to some of the more commonly asked questions:

Absolutely not. Filing for bankruptcy won’t impact your ability to access any medical care or treatment. However, private healthcare providers might have their own policies regarding unpaid balances from prior treatments you may have had.

A Chapter 7 bankruptcy remains on your credit report for up to ten years, while a Chapter 13 stays on there for seven. During this time, you can take the steps needed to start rebuilding your credit.

Medical bills incurred after filing for bankruptcy aren’t included in the case and remain your responsibility. For this reason, it's important to manage ongoing expenses carefully during and after the bankruptcy process.

There is no minimal debt requirement to file for bankruptcy, but the decision should be based on your overall financial situation, including the burden of medical bills and other debts.

If you co-signed a medical bill, you are legally responsible for that debt. Filing for bankruptcy may relieve your obligation, but the other co-signer will still be held accountable unless they also file for bankruptcy.

No, you don’t have to be behind on your medical bills. If you find your financial situation is not sustainable, even if you have managed to stay current with payments, bankruptcy can still prove to be a good option.

Medical debt is a big issue that affects many residents of Yakima, Washington. Understanding your options, including Chapter 7 and Chapter 13 bankruptcy, is important for making an informed decision.

By leveraging federal and state laws, consulting with a qualified Yakima bankruptcy attorney, and exploring alternative solutions available, you can regain control of your finances and move toward a more stable future.

If you’re struggling with medical bills, consider reaching out to a bankruptcy attorney in Yakima to discuss your options. With the right support and guidance, financial recovery is definitely within reach.