Chapter 7 vs. Chapter 13 for Medical Debt

Both Chapter 7 and Chapter 13 fully discharge medical debt. The choice between chapters depends on factors beyond the medical-debt itself: home equity, secured debt, income, and other unsecured obligations.

Chapter 7: full and immediate discharge

For debtors with primarily medical debt and limited assets, Chapter 7 is typically the cleanest option:

• Medical debt fully discharged at case completion (typically ~3-4 months from filing)
• No required payment plan
• No income contribution required if below median income (or means-test passes)
• Suitable for debtors who don't need to protect substantial non-exempt assets

Chapter 13: structured plan

For debtors with medical debt plus reasons to use Chapter 13 (home equity to protect, secured debt to cure, above-median income), Chapter 13 still discharges medical debt at plan completion:

• Medical debt is general unsecured; receives pro-rata distribution under plan
• Discharge at plan completion (3-5 years)
• Protects non-exempt assets from liquidation (debtor pays creditors over plan period instead)
• Suitable for debtors with home equity, secured-debt cures needed, or above-median income that triggers means-test conversion

The means-test interaction

If the debtor's income is above the state median, the means test (§ 707(b)) controls Chapter 7 eligibility. Above-median debtors with medical-debt-driven cases:

• Often pass the means test if medical expenses are properly documented as continuing
• May convert to Chapter 13 if presumed abuse arises
• Should track ongoing medical expenses on Schedule J for accuracy

The "actual current expenses" angle

For medical debtors with continuing medical expenses, the means-test allows deduction of actual healthcare expenses in excess of the IRS national standard. This includes:

• Continuing prescription costs
• Specialist co-pays and treatment costs
• Medical equipment and supplies
• Insurance premiums

Document these carefully — they materially affect the means-test result for medical debtors.

Practical decision framework

For most medical-debt-driven cases, the practical decision tree:

1. Below-median income, limited non-exempt assets → Chapter 7
2. Above-median income, passes means test → Chapter 7
3. Above-median income, fails means test → Chapter 13
4. Substantial home equity above exemption → Chapter 13 (to protect equity)
5. Recent secured-debt arrearages (mortgage, car) → Chapter 13 (to cure)

Educational only. Specific case decisions require a licensed bankruptcy attorney.