The term “medical bankruptcy” is used to describe situations in which a person is forced to file for bankruptcy because of his or her unaffordable medical cost, but it’s really just a bankruptcy that was caused by medical debt. Medical bankruptcy is treated the same as other types of bankruptcy, it just offers relief from medical debt.
Medical expenses are one of the primary reasons people file for bankruptcy. If you feel as if you are being crushed by medical debt, you are not alone. Millions of people struggle to pay the cost of their medical care and for many, medical bills accumulate to the point they are no longer affordable.
The cost of medical treatment is often more than people expect and many fail to plan for unexpected medical emergencies. A serious medical diagnosis can result in years of medical costs and hundreds of thousands of dollars in debt.
High Premiums Don’t Mean Lower Out-of-Pocket Expenses
Even when someone has medical insurance, the out-of-pocket expenses they are responsible for can lead them into debt. Data shows patients are paying much higher premiums than they were 10 years ago and even with the higher premiums, their out-of-pocket expenses are astronomical.
Making a bad situation worse, many people who are drowning in medical debt are also dealing with health issues that leave them unable to work. Not only are they accumulating debt, they’re not earning money to pay toward the debt. And this is on top of their other debts that might also be falling behind. Many people considering medical bankruptcy are also dealing with potential foreclosure and endless calls from bill collectors over credit card debts.
It’s all too common for people who are faced with medical debt to be forced to pull from their savings to meet their obligations. Some even have to choose between necessities such as food or housing costs, and paying their medical debt. Despite the battles they face with their health, they must also deal with financial battles, and unfortunately, this is often what brings them the most misery.
Can You Avoid Medical Bankruptcy?
It’s impossible to predict the future and to know whether or not you will be forced to deal with a catastrophic medical event. Even if you have put a significant amount of money into savings, you can still reach a point where your medical costs are just too much.
If you do find yourself with mounting medical debt, there might be a few things you can do to avoid things getting out of hand. The most important thing you can do about your medical debt – or any type of debt – is to not ignore it. It’s not going to go away on its own and your situation will get worse if you ignore the problem. Speak to someone about arranging a payment plan or contact someone about filing for bankruptcy. Either option is better than ignoring the debt and hoping things will work out on their own.
It’s also important to pay close attention to your medical bills and verify that your charges are accurate. This is tough for some people because they are intimidated or embarrassed about not being able to pay what they owe. Their debt continues to accumulate, often inaccurately, but they take no action because they assume they aren’t in a position to speak up. If you believe your debts are inaccurate, you should always take action. Billing errors are common, so don’t be afraid to ask questions and fight for what you believe is right.
Using Credit Cards to Pay Medical Bills
Some people believe paying for their medical care or making monthly payments toward their medical bills with a credit card is a good idea. Though you have the right to use a credit card, it’s rarely the best option. Credit cards have high interest rates, so your medical care will cost you more in the long run than it would’ve had you found another solution.
Instead of using a credit card, try to negotiate a payment plan directly through the hospital. Working one-on-one with your medical care provider concerning payments also gives you more flexibility when it comes to lowering the cost of your care. A doctor or hospital can offer patients paying out-of-pocket for their care a discount, but you’ll receive no discount from a credit card company.
Filing for a Medical Bankruptcy
The process of filing for bankruptcy because of medical debt is the same as filing for other types of bankruptcy. You’ll speak to an attorney who can help you determine whether Chapter 7 or Chapter 13 is the best option for you.
In Chapter 7 bankruptcy, the majority of your medical debt is discharged. Your assets are liquidated and the bankruptcy becomes a part of your credit history, but you are no longer obligated to pay the cost of your medical care.
Should Chapter 13 bankruptcy be the better option for you, you’ll work with the bankruptcy court to arrange a repayment plan. This means a portion of your medical debt will likely be paid over the course of the repayment plan, but anything that goes above and beyond the plan is discharged.
What’s the Next Step?
If you are feeling the strain caused by medical debt or you believe the time has come to file for bankruptcy because of your medical bills, the first thing you should do is contact an attorney. You’ll begin by reviewing your situation, including the medical debts you owe.
It’s important to organize the information associated with your medical debts because you’ll need to submit this to the bankruptcy court. You and your attorney will also review the other information that will be submitted to the court, including pay stubs, tax information, assets, and other debt.
Mounting medical debt can feel overwhelming, especially if you are also battling health problems and dealing with other obligations. The good news is you don’t need to feel helpless. Bankruptcy can allow you to get a handle on your situation and make a fresh financial start, even if you’re unable to afford your medical bills.
If you aren’t sure if bankruptcy is the best option for you or you have questions about your situation, we may be able to help. Contact us at 1.800.220.4318 for more information to schedule a consultation.