The interplay of medical debt and bankruptcy

Medical costs are at an all-time high, and a record number of Americans are having difficulty paying their medical bills. Tens of millions of people annually deal with negative economic consequences (having to pay bills on payment plans, run up credit card debt, exhaust savings accounts or borrow money) because they or a loved one are dealing with out-of-control medical expenses. Even people with comprehensive health insurance are not immune because of annual limits, out-of-pocket costs and costs of uncovered tests, procedures, equipment or medications.

There is no way to tell yet how the government's uniform health care coverage plan will affect these people, but in the short term, many are dealing with more medical debt than they could possibly manage, and record numbers of them are turning to bankruptcy protection for help.

What can bankruptcy do about medical bills?

Depending on a number of factors, it might be possible for someone to have the bulk - or all - of their medical debt discharged by a bankruptcy filing. While medical debt isn't specifically addressed by the bankruptcy code, it is still one of the three main reasons (along with divorce and job loss) that people file for bankruptcy. Unsecured debt like hospital bills might be discharged in a Chapter 7 bankruptcy filing, or a Chapter 13 filing could put the filer on a payment plan to handle bills in an affordable, workable manner for a set time before discharging the remainder.

One thing bankruptcy can't do is help patients accruing additional debt due to routine treatment or future expenses, but taking care of a fraction of the debt is still a tremendous relief to most people.

Bankruptcy options

A bankruptcy filing is a great help for some people, but it is not for everyone, and it must be carefully considered from all angles beforehand. Whether bankruptcy is a good fit for a particular filer depends on a number of factors, including:

  • How the medical bills were accrued
  • Whether bills were paid with a credit card, by cash or by check
  • Whether the person filing for bankruptcy has an income
  • How much debt exists
  • Efforts to negotiate workable payments directly with the health care provider have been unsuccessful

Are you dealing with unmanageable medical debt? Would you like to learn more about whether bankruptcy could be right for you? Are you worried about making payments to medical providers in lieu of essentials like food and utilities? If the answer to any of these questions is yes, consider seeking the advice of an experienced bankruptcy attorney in your area to learn more about how bankruptcy works and what kind of debt management options are best for your unique financial situation.