TOMS RIVER, NJ - Medical debt affects millions of Americans and is classified as nonpriority unsecured debt under federal bankruptcy law, making it eligible for discharge through either Chapter 7 or Chapter 13 bankruptcy proceedings. Toms River bankruptcy attorney Daniel Straffi Jr. of Straffi & Straffi Attorneys at Law (https://www.straffilaw.com/can-my-medical-debt-be-paid-off-with-bankruptcy/) explains how each chapter of bankruptcy addresses medical bills and what New Jersey residents should know before filing.
According to Toms River bankruptcy attorney Daniel Straffi Jr., Chapter 7 bankruptcy eliminates medical debts within three to six months through a liquidation process where a trustee may sell certain non-exempt assets to pay creditors. Chapter 13 bankruptcy reorganizes medical debt into a repayment plan lasting three to five years based on disposable income, with remaining balances discharged upon plan completion. "Both chapters provide an automatic stay immediately after filing, which stops collection calls, suspends lawsuits, and halts wage garnishments," explains Straffi.
Toms River bankruptcy attorney Daniel Straffi Jr. notes that Chapter 7 eligibility requires passing the means test, which compares household income to New Jersey's median income for the applicable family size. For cases filed on or after April 1, 2025, federal bankruptcy exemptions include a homestead exemption up to $31,575 in equity and a motor vehicle exemption up to $5,025, subject to detailed rules and individual circumstances. Property not protected by applicable exemptions may be sold by the trustee to pay creditors.
Attorney Straffi highlights that Chapter 13 eligibility is subject to debt limits set by federal law and adjusted periodically. For cases filed on or after April 1, 2025, unsecured debts must be less than $526,700, and secured debts must be less than $1,580,125. "Chapter 13 generally allows individuals to keep their property while making monthly payments to a trustee, who distributes payments to creditors according to priority rules," he adds.
Under New Jersey Revised Statutes Section 2A:14-1, lawsuits to collect medical debt must generally be filed within six years after the claim accrues. However, the statute of limitations only prevents legal action and does not erase the debt. Creditors may continue collection efforts through phone calls and letters unless the debt is discharged through bankruptcy.
Before filing, individuals must complete mandatory credit counseling from an approved agency within 180 days of the petition date. Required documentation includes income records, tax returns, bank statements, medical bills, collection notices, mortgage or lease agreements, and a list of monthly living expenses. After filing, a meeting of creditors conducted by a bankruptcy trustee reviews the petition under oath, and a debtor education course must be completed before a discharge is granted.
"Bankruptcy only discharges medical debts that existed before the filing date," observes Straffi. "Post-filing medical expenses become new obligations, so individuals expecting ongoing medical costs should discuss timing with their attorney before filing." The U.S. Bankruptcy Court for the District of New Jersey, with locations in Newark, Trenton, and Camden, handles all bankruptcy proceedings in the state. Ocean County residents typically file at the Trenton courthouse.
For those overwhelmed by medical debt in New Jersey, consulting an experienced bankruptcy attorney may help determine whether Chapter 7 or Chapter 13 is the appropriate path toward financial recovery.
About Straffi & Straffi Attorneys at Law:
Straffi & Straffi Attorneys at Law is a Toms River-based law firm dedicated to bankruptcy law and financial recovery. Led by attorney Daniel Straffi Jr., the firm has over 20 years of experience helping individuals and families navigate Chapter 7 and Chapter 13 bankruptcy proceedings throughout Ocean County and New Jersey. For consultations, call (732) 341-3800.
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Company Name: Straffi & Straffi Attorneys at Law
Contact Person: Daniel Straffi, Jr.
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Phone: (732) 341-3800
Address:670 Commons Way
City: Toms River
State: New Jersey 08755
Country: United States
Website: https://www.straffilaw.com/
