Unexpected medical expenses can put a serious strain on your finances and make it very difficult to take care of your financial obligations.
Even taking care of day to day expenses like food and utilities can become a stressful juggling act when you’re trying to pay off past due medical expenses.
Depending on your situation, filing medical bankruptcy may be your best and most viable option. If bankruptcy is your best option, then by no means are you alone. Medical debts were responsible for half the bankruptcy filings, according to a 2016 Kaiser Family Foundation study. This means many Americans found themselves in a similar situation, and after exhausting other options, determined bankruptcy was the path to a brighter financial future.
In fact, enough Americans filed for medical bankruptcies that, in 2016, Congress enacted what’s called the Medical Bankruptcy Fairness Act. This act prevents filers from having to liquidate up to $250,000 in interest or equity of certain types of property.
What does it mean to file for medical bankruptcy?
Bankruptcy for medical bills is a court proceeding in which a judge and court trustee examine your income vs. expenses along with your assets and liabilities to decide whether to discharge your debts, making you no longer financially responsible.
This can only include medical bills incurred before your case filing date. Any medical expenses incurred post-filing will not be included in medical bankruptcies, even if they’re incurred while your case is still under review.
Even if medical bills are your primary reason for filing, you’ll still need to list all of your debts both secured and unsecured on the official documents. This gives the judge an accurate representation of your financial situation and allows for a proper and well-informed determination.
What are the requisites to file for medical bankruptcy?
In order to receive assistance with your medical debts, you’ll need to qualify for either Chapter 7 or 13 bankruptcy.
In order to qualify for Chapter 7 bankruptcy, the debtor must earn less than the state median income on a monthly basis and submit to an examination of their financial records, including income and expenses, along with secured debt (mortgages and car loans) and unsecured debt (medical bills, credit card bills, personal loans, etc.).
Chapter 7 bankruptcy is commonly referred to as liquidation bankruptcy. This type of bankruptcy is generally meant for people with limited incomes who do not have the ability to pay back all or some portion of their debts. Chapter 7 bankruptcy may result in you needing to liquidate any or all assets you have available to help pay down your debts.
Not only can Chapter 7 bankruptcy clear medical debts, but it can also clear many other types of debt as well.
Chapter 13 bankruptcy acts more like an extended payment plan for your medical bills. Chapter 13 allows those with enough income to repay all or part of their debts as an alternative to liquidation. It’s bankruptcy for those whose most significant problem is dealing with creditors’ demands for immediate payment, not lack of income.
To be eligible to file for Chapter 13 bankruptcy, an individual must have no more than $394,725 in unsecured debt, such as credit card bills or personal loans. They also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans. These figures adjust periodically to reflect changes in the consumer price index.
How to prevent medical bankruptcies
While bankruptcy may be a viable option, there are additional ways we can help alleviate the burden of costly medical expenses. We have a long history of successfully negotiating final settlement agreements with many creditors that have saved our client’s thousands. We work directly with your creditors to obtain the best settlement offer possible on your behalf.
This option is available dependent upon medical debt amounts and how many creditors are owed. While it may not be an ideal option for every situation, we’ll gain a thorough understanding of your financial situation to confirm rather this or any other bankruptcy alternatives are right for you.
What happens when you file for medical bankruptcy?
Filing for medical bankruptcy not only effects your medical bills, it can also affect other areas of your life related to your finances.
On your credit
Your bankruptcy filing will be accompanied by a substantial negative effect on your credit, unfortunately. The filing will show on your credit report for 8-10 years and could make obtaining new lines of credit, favorable interest rates, and other credit-related privileges more difficult. Fortunately, we provide every one of our clients with helpful and time-tested tips on how to start rebuilding their credit after filing.
Any hospital bills due previous to your filing will be covered, and there shouldn’t be any impact on your presently held health insurance. Your doctor’s office may be aware of the filing, and that could result in a reluctance to engage in financial transactions in the future. Fortunately, by law, you cannot be refused medical treatment in an emergency.
Bankruptcy filing only affects your family if you held a joint asset or debt with the family member. You’ll have an opportunity to list any jointly held debts or assets during your filing, and you must do so to ensure all involved parties are knowledgeable of the situation.
You’ll also be required to take two credit counseling courses when filing for bankruptcy. These courses will give you useful information regarding the affect’s bankruptcy has on your credit, along with detailed information on how to manage your credit moving forward. While medical bills aren’t necessarily a form of credit that can be misused, you’ll still be able to gain an understanding of how paying or not paying your medical debts can affect you in the future.
The courses are typically either 30 or 60 minutes each and can be completed online or over the phone for your convenience.
While filing for medical bankruptcy may not be something you’re looking forward to, it can provide you some much needed relief from your medical debts along with almost any other debts and give you the clean slate you need to take control of your finances.
We understand that medical bills can be unexpected and cause undue stress and financial burden on honest, hardworking people. Helping our clients find their financial stride and regain command of their financial future is what drives us. We offer a completely free initial consultation to help determine rather you’re eligible for bankruptcy. We’ll also discuss any other alternatives we may have to help alleviate your medical expenses and get you back on the right track.
The longer you wait to take control of your medical bills, the worse they can get, so contact us now to schedule your free initial consultation.
We look forward to helping you!