Medical Debt and Bankruptcy: What You Need to Know

Medical debt is one of the most common — and most devastating — causes of personal bankruptcy in the United States. A widely cited study found that 66.5 percent of personal bankruptcy filers cite medical bills as a contributing cause, and as many as 550,000 families file for bankruptcy each year partly due to healthcare costs.¹

A 2024 study published in a peer-reviewed journal found that 36 percent of U.S. households carried medical debt, with 21 percent having a past-due medical bill and 23 percent actively paying a medical bill over time to a provider.²

Is Medical Debt Dischargeable in Bankruptcy?

Yes — medical debt is fully dischargeable in both Chapter 7 and Chapter 13 bankruptcy. Unlike student loans or domestic support obligations, medical bills are classified as general unsecured debt, which means they receive no special protection in bankruptcy and are treated the same as credit card debt.

In a Chapter 7 case, medical debt is typically eliminated entirely at discharge — usually within 3–6 months of filing. In Chapter 13, medical debt is treated as unsecured debt in the repayment plan; depending on your disposable income, you may pay only a fraction of the total balance, with the remainder discharged at plan completion.

What Counts as "Medical Debt"?

Medical debt eligible for discharge includes:

• Hospital bills (emergency room, inpatient, outpatient)
• Physician and specialist fees
• Surgical and anesthesia charges
• Ambulance bills
• Prescription drug balances
• Physical therapy and rehabilitation costs
• Mental health and behavioral health treatment bills
• Medical debt sold to collection agencies
• Medical credit cards (CareCredit, Alphaeon, etc.) — treated as credit card debt

Medical Debt and the Means Test

One important consideration: if your income exceeds the state median, the means test requires you to deduct allowable expenses from your income to determine disposable income. Medical expenses — including ongoing prescriptions, treatments, and insurance premiums — are among the allowed deductions. High ongoing medical costs can significantly reduce your calculated disposable income, making it easier to qualify for Chapter 7 even at higher income levels.

Alternatives to Bankruptcy for Medical Debt

Before filing, it is worth exploring whether these alternatives can resolve your medical debt without bankruptcy:

• Charity care programs: Most nonprofit hospitals are required by the IRS to offer free or reduced-cost care to patients below certain income thresholds. Ask the hospital's financial assistance office.
• Medical debt negotiation: Hospitals and collection agencies frequently settle medical debt for 20–50 cents on the dollar, particularly for older balances.
• State medical debt relief programs: Several states have enacted laws limiting medical debt collection or providing relief programs. Check with your state attorney general's office.
• Credit reporting changes: As of 2023, the three major credit bureaus removed medical debt under $500 from credit reports and shortened the reporting window for paid medical debt.

Next Steps

If medical debt is threatening your financial stability, you do not have to navigate this alone. A bankruptcy attorney can review your full financial picture — not just the medical bills — and help you determine whether Chapter 7, Chapter 13, or a non-bankruptcy alternative is the right path.

Find a bankruptcy attorney in your state →