As medical costs continue to rise, bills from medical and hospital care are playing a large part in many peoples’ decision to pursue bankruptcy. It doesn’t take long for medical debt to pile up when you factor in the costs associated with doctor’s visits, therapists, hospital bills, and credit card debt often incurred from those who are underinsured or not insured at all.
These bills can become insurmountable, especially when initial charges are accompanied by interest, penalties, and late fees, it can lead to collection efforts and take its toll on your peace of mind. Luckily, there is a way out.
Filing Bankruptcy For Medical Debt
Because it’s considered the same as unsecured debt, bankruptcy can be an appropriate choice for those overwhelmed by medical debt. While you can’t “target” a bankruptcy at medical bills, it can be the right tool to help you improve your overall financial health and get back on a stable footing because bankruptcy does cover medical bills as well as the bills that can pile up in the wake of a medical need. Your first step is to contact an experienced bankruptcy attorney who can help you understand your options and what they will mean for your unique financial situation.
The High Costs Of Healthcare in the United States
Across the country, healthcare costs continue to skyrocket. Under our healthcare system, prices are inflated to generate as much profit as possible from third-party insurance companies. As consumers deal with higher deductibles and cost-sharing, that leaves more and more of the expenses for their doctor and hospital visits their responsibility.
Denied claims for out-of-network providers may leave you responsible for paying these inflated prices. For uninsured patients, a single emergency room visit can cost tens of thousands of dollars of bills with no third party to assist, often resulting in a financial catastrophe. More and more people are asking if you can file bankruptcy on medical debt.
What is Healthcare Debt?
Healthcare debt consists of bills from doctors, hospitals, therapists, other healthcare providers, or collections agencies working for them. Healthcare debt does not have a special status or priority like some other types of debt such as student loans. Medical debt it is treated, under most circumstances, like any other unsecured debt. This puts it in the same category as other unsecured obligations, such as credit cards, which means bankruptcy treat medical debt largely the same.
If you’ve converted that debt into a secured form, such as taking out a loan against your car or property to get money to pay medical bills, this is not the case anymore. Despite the reason you went into debt, this is no longer considered to be medical debt and is instead treated as any other mortgage or car loan.
Never let a creditor talk you into converting your unsecured debt to a secured obligation, because it can be much more difficult to get out of financial difficulty and retain your property.
How Bankruptcy Affects Your Debt
You can file bankruptcy on medical bills under either a Chapter 7 or Chapter 13 petition depending on your needs, and which you file will determine how your debts are handled.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy seeks to have your debts discharged, meaning that qualifying debts, such as unsecured credit or medical bills, are expunged by the bankruptcy and no longer enforceable and won’t have to be paid.
Secured debts, such as a mortgage on your house or your vehicle payments, will simply continued to be paid as normal if you want to keep them and are current on the payments. If you don’t want to keep a house or car or other secured debt, the item can be given back and the debt wiped-out.
It’s important to note that some debts may not qualify for discharge under Chapter 7, student loans, for instance, and there is a means test applied to see if you qualify for this type of bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is sometimes referred to as a repayment plan. Rather than paying creditors directly, people make a monthly bankruptcy payments to the court. The court then pays any secured debt items in the Chapter 13 bankruptcy such as house or car payments, and sometimes can pay a percentage of unsecured debts.
This plan lasts 3 to 5 years and you can end up paying thousands of dollars less than you would have otherwise. It also stops the collection calls and can help you keep and restructure your secured property like house and vehicles.
For both types of bankruptcy, credit counseling will be required before and after you’ve filed. This will help you understand whether or not bankruptcy is the right option for you and to help you better understand financial management so you can avoid it in the future.
In both cases, bankruptcy will appear on your credit reports for at least 7 years, but managing the process effectively can help show future lenders that you have taken steps to ensure your long term financial stability.
Can I Seek Medical Help if I Cannot Pay?
Under the Emergency Medical Treatment & Labor Act (EMTALA), hospitals cannot refuse to treat patients for emergency health concerns based on an inability to pay. Most hospitals will treat you moving forward as long as future bills are paid and kept up to date. However, private providers and practices may decide to no longer see you. Unfortunately, in this circumstance, you would need to find another medical provider, but a prior bankruptcy should not interfere with finding a new doctor at a different practice.
Talk to an Experienced Debt and Bankruptcy Lawyer
If you’re facing an overwhelming amount of medical debt, you need an experienced bankruptcy attorney. Our lawyers have the tools and resources to help you regain financial independence. Contact Leinart Law Office for a free consultation with an attorney today.