A Deeper Look at Medical Bankruptcy
Bankruptcy is a big decision to make as it can save you from financial ruin. If you’re thinking about filing for bankruptcy due to your medical debt , you should take a deeper look and review the pros and cons of filing bankruptcy.
The first thing to realize is that filing bankruptcy for medical reasons is just like filing for any other reason, its exactly the same process and will affect your credit in exactly the same way. How will your credit be affected? Well, a bankruptcy can affect your credit score for up to 10 years, but on the positive side, from the day you file bankruptcy you can begin rebuilding your credit and with your financial problems behind you you actually may end up in a better position in the long run or at least in a pretty good position in a fairly short time.
In addition to affecting your credit score, a bankruptcy can also affect your ability to get a loan and a mortgage. However, now there are programs for people who have had a bankruptcy to help them get loans for homes but you may still end up paying a higher interest rate because lenders may see you as more of a risk.
One of the biggest benefits to filing bankruptcy is you get a fresh start and with the required financial and credit counseling, hopefully you’ll be better prepared to handle your debt this time around. You also come away with a peace of mind, knowing that you will no longer be harassed by collection agencies and creditors as the cloud of debt had been lifted from your life.
Medical Debts and Bankruptcy
Medical debt continues to be one of the most common reasons why consumers file for bankruptcy protection. Since unemployment continues to be a challenge for many Americans across the country there is a continued lack of financial support for medical insurance coverage. The same is likely for those who are underemployed. Even some with medical coverage find themselves struggling to keep up with necessary expenses when an unexpected medical emergency happens.
While many may find personal debt such as credit card bills and outstanding loans overwhelming, others may find medical debt alone to be a big problem for several reasons. Debt collectors for medical collection agencies, as well as hospitals and other medical-related businesses have become more aggressive with their collection tactics. This may include forwarding delinquent accounts over for collections sooner than expected. Outstanding medical debt is also being pursued in small claims court, which often comes as a surprise to patients and consumers.
Bankruptcy is often seen as a last resort for resolving outstanding debt. The same is true for medical debt, especially when patients are unable to agree on an affordable payment plan with creditors. Having limited income makes making payments more difficult which is why bankruptcy is a good option to consider. The filing process helps stop wage garnishment , prevents further legal action from lawsuits served and helps protect personal property from being seized to satisfy creditors. If you feel overwhelmed with outstanding debt obligations, review your situation with an experienced attorney to learn if bankruptcy is the best option for you.
Bankruptcy can help reduce the burden of paying debt obligations depending on which chapter is filed. Chapter 7 bankruptcy eliminates or discharges unsecured debts such as credit card bills, personal loans, and medical bills.
Chapter 13 bankruptcy reorganizes debts into an affordable monthly plan that allows debtors to make payments based on their income ability. Chapter 13 also helps stop foreclosure, repossession and disconnection of utilities.
When you or a loved one is dealing with an illness or other health concerns, the last thing you want to worry about is how bills will be paid. This is when an experienced bankruptcy attorney may be able to help you find
an appropriate solution to your situation. There are other situations that may have you thinking about bankruptcy such as job loss and determining how to maintain health insurance coverage that is no longer sponsored
by an employer.
If you are dealing with medical debt or find it is becoming increasing difficult to make necessary monthly payments because of medical bills, discuss your situation with a bankruptcy expert.
Recovering from a major illness or injury often means recovery financially from mounting medical debt . Even individuals with health insurance find that medical debt is a leading cause for considering bankruptcy. Unfortunately, many debtors consider bankruptcy long after they have substantially whittled away at their limited resources and assets.
Medical bills seem to grow exponentially, one visit to a doctor is bad enough but when there are additional tests and treatments added to the bill, visits and consults with specialists and then huge prescription charges; well, suddenly you’re drowning in medical debt and it feels like there is no way out.
Filing for bankruptcy is not something that should be taken lightly, whether you’re doing it for medical reasons or other reasons. Bankruptcy is a serious step and while it can be the help you need to start over there are some long-reaching implications. So if you’re facing huge medical debt and ongoing treatment there are other steps you should consider first. Ask for a discount, join non profit groups or turn to ones you already belong to, check with pharmaceutical companies for discounts, ask friends and family.
Only when you’ve exhausted all efforts to make your medical debt manageable should you turn to bankruptcy. And then, you should make sure you visit with a bankruptcy attorney to get the timing right. As mentioned above, filing for bankruptcy too early may leave you with a large amount of bills that occur after the bankruptcy, these will be your responsibility. Bankruptcy only covers bills that you have already incurred, not ones that crop up afterward. An attorney, and a treatment plan from your healthcare provider, can help you determine when to file for medical bankruptcy.
Below are a few ways that medical debt can harm finances and some tips on what debtors can do to limit the damage to their assets:
Nondischargeable Credit Card Debt
One of the first things some debtors do instead of filing bankruptcy is charge their medical debts to a credit card. Sometimes hospitals and individual doctors offer financial incentives for paying off a medical bill immediately, so instead of waiting debtors charge it to their credit card, even if they know they can’t pay it off. This can cause a problem once they file bankruptcy because once the creditor realizes that the debtor had no intentions of paying off the medical debt charge, they will request that the bankruptcy trustee make the debt nondischargeable.
This means that not only will the bankruptcy debtor remain stuck with a debt that would have otherwise been discharged in bankruptcy; they will pay extraordinarily high interest rates on it. To avoid this, debtors should forgo charging any medical debt to their credit card unless they know for sure that they can pay it off.
Ignoring Medical Debts
While it’s true that medical debts generally don’t end up on your credit report, if you ignore the debt it can end up on the desk of a third-party debt collector. This means that the medical debt which would have otherwise remained interest free might begin to incur penalties and other fees tacked on by the third-party debt collector. This process can make a medical debt balloon quickly into a much larger debt.
If a debtor knows that they cannot pay their medical debt, they should immediately contact the hospital and try to negotiate a settlement, or forbearance until their financial situation improves. If they know that their financial situation won’t improve in the near future, they need to speak with a bankruptcy attorney about their bankruptcy options. At least if they file bankruptcy earlier in the collections process, they can avoid causing the bills to inflate.
Using Debt Settlement Companies
While it’s completely acceptable to attempt to settle medical debt on your own, especially if you have no other debt issues, using a debt settlement company to do so might actually create more expense. Debt settlement companies promise to help debtors pay pennies on the dollar but they are often unable to deliver. Along with heavy fees charged to the debtor, debt settlement companies don’t have the power of a bankruptcy court to force a creditor to settle the debt. Debt settlement abuses have become so prevalent that some creditors are refusing to deal with debt settlement companies.
Can I File Bankruptcy for Just Medical Debt Only?
Many consumers find themselves drowning in medical debt and wonder can bankruptcy be filed for medicals bills without including other debt such as credit cards and other accounts. You can file bankruptcy for your medical bills but it is unlikely you’ll be able to file without including other debts.
While bankruptcy may allow you to wipe away debt or restructure it with a payment plan, the process also allows for creditors to be treated fairly. It’s one thing for you to choose who gets paid when you pay bills each month and you may feel some obligations more worthy than others, but in bankruptcy court it may not seem fair that you want to pick and choose certain debts and creditors when they are all entitled to receive payment.
Medical bills continue to be one of the main reasons why consumers seek bankruptcy protection. Anyone who has dealt with a long term illness, hospitalization, being underinsured or no medical coverage is aware of rising healthcare costs. Even a brief stay at the hospital has been known to create a financial burden on monthly living expenses. It is one thing to be overwhelmed in debt, but what if the debt is mostly medical related? Can bankruptcy be filed just to eliminate the medical debt ?
Filing Medical Bankruptcy
You can file bankruptcy and include your medical debt, but when you file you must include all outstanding debt you owe. Debtors have been under the impression that a so called “medical bankruptcy” can be filed to eliminate medical debt. This type of bankruptcy does not exist. Chapter 7 bankruptcy allows for eligible medical debt to be discharged. Chapter 13 bankruptcy is a repayment plan that can help pay down outstanding debt.
Upon filing for bankruptcy, all unsecured debt would be listed. This includes medical bills, back taxes, credit card debt, personal loans and etc. Since the debts previously mentioned fall under the same category they would be treated fairly by the court. Something else to consider when filing bankruptcy is which chapter to file. You may qualify to file one chapter over the other. If you are unable to make payments or don’t earn enough to pay on what is owed, Chapter 7 may be the best option. Chapter 13 allows you to repay debt under a structured payment plan within a certain time period. Discuss with a bankruptcy attorney about meeting necessary qualifications for filing.
The bankruptcy code is designed to treat debtors and creditors fairly. Most debts are classified as either unsecured or secured. This means if you have credit card debt , personal loans or other outstanding debt, you have to include them all in your filling since they are all treated the same. This can also be said for other debt obligations; if you have credit card debt you want to have eliminated, you can’t file with just the one or two accounts you want to have discharged.
What if You Intend to Incur More Medical Bills?
Discuss options with a bankruptcy attorney. Depending on your situation, you may be recommended to wait to file your case once medical treatment has been completed. Remember, when you file medical debt that exists at the time of your filing it is eligible for discharge. This includes medical debt incurred before you filed your petition.
Considering Bankruptcy Due to Medical Debt? We Can Help
If you would like to see if filing medical bankruptcy is right for you feel free to contact us today and set up a free consultation.
Delaying Bankruptcy For Medical Reasons
As we have often discussed on this blog, delaying an inevitable bankruptcy is rarely a good idea and can actually work against a debtor. But there are some circumstances that may warrant a delay in filing bankruptcy…pending medical expenses. If you’re a debtor considering bankruptcy, you may want to delay filing bankruptcy if you have scheduled medical procedures that will create more debt. In that case, you may want to wait until after you have the medical procedure to file bankruptcy. Even if you have health insurance, any medical procedure can create more debt such as co-pays, deductibles and unexpected/unplanned emergencies or complications.
For example, if you or your spouse is pregnant, many variables can cause the cost of medical care to skyrocket such as; a premature delivery, an emergency cesarean or other complications. That’s why it is best to wait until after you or your spouse delivers the baby to file for bankruptcy.
But it’s not just pregnancy that can create medical debt, other procedures i.e. dental work, elective surgery or even routine check-ups can deliver medical debt to your doorstep unexpectedly. That’s why it is best to wait until after you’ve had medical procedures to file bankruptcy.
What You Should Do When Medical Debt Strikes
You have health insurance; but it’s not adequate cover and now you have $100,000 in medical bills, what should you do?
Millions of Americas with and without health insurance have filed bankruptcy because of medical debt . More than 62 percent of U.S. bankruptcies were caused medical debt.
How to handle medical debt when it strikes:
- If you are uninsured and are hit with medical debt, one of the first things you should do is inform the medical provider that you are uninsured. Many medical providers offer discounts to uninsured patients because they know that many patients end up filing bankruptcy because they cannot afford the payments. To increase their chances of getting paid they may significantly reduce the medical bill.
- See if you qualify for Medicaid. Many low-income patients qualify for Medicaid which may pay for some or all of your medical expenses.
- Look at your finances. Are you unemployed and have no income? Do you have other debts that you are unable to pay? Will paying your medical debt jeopardize your financial stability? If so, you may want to speak with a bankruptcy attorney to discuss your bankruptcy options. Bankruptcy will not only give you an opportunity to discharge your medical debt, but you may also discharge credit card debt and other unsecured debt during bankruptcy.
One of the best preventive actions you can take when dealing with medical debt is avoiding it in the first place. While sometimes it is difficult to avoid medical debt, having adequate health insurance is the first step in the right direction. Work with your insurance broker to find a health insurance policy that will address your needs and that will provide enough coverage so that you don’t end up with massive medical debt when an illness strikes.
Tips to Help You Deal With Your Medical Debt
If you’ve got a mountain of medical bills staring you in the face you’re probably feeling a bit overwhelmed. The following medical debt tips should help you deal with your bills and get back on your feet in the fastest time possible with the least amount of trouble.
While carrying debt is no fun and can weight on your mind, remember that medical debt in and of itself does not negatively affect your credit, not until your account is sent to a collection agency or you’re sued.
Don’t Use Plastic
Because medical debt does not affect your credit you shouldn’t put any medical charges on your credit cards or accept a doctor sponsored credit program, these both are recorded on your credit report immediately.
Ask for a Payment Plan
Talk to your healthcare provider about your bills and your honest ability to pay. Many healthcare providers will give you a few different options, sometimes writing a portion of the bill off, sometimes giving you a reasonable timeframe and in some situations you’ll get both options.
Turn to Taxes
Medical debt is tax deductible so take advantage of this fact and claim it on your taxes, it will save you money in the long run.
Whether you belong to a church group, a civic organization or even if you have a specific medical diagnosis, you may be able to get financial support from these groups to help you take care of your medical debts.
Medical bills are the most common reason why people in America today file for bankruptcy. If you feel that you’ve tried everything you possibly can to manage your medical debt on your own and you’re still overwhelmed, then bankruptcy may be the best solution for you.
Review Medical Bills
Check your medical bills thoroughly to make sure there were no errors in charges and other information. Any wrong information may affect the way your insurance pays.
Resubmit to Insurance
If your insurance denies all or part of your claim and you think they should cover the charges, resubmit them. If it’s questionable, as your healthcare provider’s office if you need a medical necessity letter.
If you have a serious illness then there is a chance that a charity organization is established for your disease, see if they can offer help or even advice to help you get through this difficult time and handle your medical bills.
If you have tried the above tips and have not found a solution then you may want to consider filing bankruptcy so your entire financial future isn’t jeopardized.
Ask your healthcare provider’s medical billing office if they’d be willing to give you a discount. It doesn’t hurt to ask and you might be pleasantly surprised.
Compare Costs and Care
You instinctively don’t want to get the bargain basement price when it comes to your healthcare because many of us believe you get what you pay for, but remember the pricier option doesn’t necessarily mean its better care. Don’t just look at the cost of procedures but at the hospital’s complication and survival rates.
Outsource Your Tests
It is easy to go to your doctor and have your tests done there on the premises, but you’re probably paying for that convenience. You don’t have to have tests and x-rays performed at the same clinic or hospital your doctor is affiliated with so why not shop around. Free standing imaging centers do tend to be less expensive, so give them a shot.
There are so many ways to save on prescriptions, everyone should be looking into ways to cut costs here. The first step is to talk to your doctor and your pharmacist. Your doctor knows what drugs will work for you, your pharmacist is tuned in to the costs of these drugs; go back and forth between the two of them if you have to. Also, look into generics, over the counter medications, discount programs, and even pharmaceutical sponsored programs.
Don’t let the healthcare industry dictate what you will pay for your medical bills and where you will get treatment, take charge of your life, your health and your finances.
Can Your Job Help Cut Medical Bills?
Believe it or not, if you’re worried about potential medical bills, you may want to change jobs. A decade or two ago health insurance was covered by employers and that was a given. The employee rarely had to pay anything toward their insurance coverage (and their family’s coverage as well) and if they did it was minimal. Boy, how times have changed. Now the health package that an employer provides its employees should be a major consideration when taking a new job. Imagine the difference a good, work-funded health insurance plan would make to an employee with serious medical problems versus a good paying job that didn’t offer any health benefits. In the long run the health insurance plan is much more valuable than the salary of the other job.
If you are employed and don’t plan on leaving your current position, then it might be time to talk to your company’s HR department to see if you’re taking full advantage of the health insurance benefits that may be offered at your job. Look into any cafeteria plans that let you set aside money, pre-tax, to be paid toward healthcare expenses throughout the year. Also there may be incentives to employees who sign up for wellness programs and even gym memberships. If you’re married to someone who also works, compare the two health insurance plans to see if switching from one to the other offers more coverage and additional incentives.
Finally, get proactive with your company. Start pushing for small bonuses the company can to do incentivise the employees to be healthy. Try organizing a fitness competition. Check to see if you can arrange a vaccine day at your place of employment. Push for a smoke free work environment.
Whatever you do, don’t overlook your job as a place to start cutting medical bills and to begin a healthy outlook.
Using Bankruptcy to Stop Medical Debt Collections
Medical debt continues to be one of the top reasons why bankruptcy is filed. Yet, many debtors are unaware of how the filing process can help stop medical debt collections. Whether you’re facing a pending lawsuit for an outstanding balance, having wages or funds garnished from your account, need legal assistance in making affordable payments, or you just don’t have the funds to make regular payments, bankruptcy may provide the solution you need to stop collection attempts . If you qualify, you may be able to get your debt discharged or have a court-approved payment plan established to regain financial control.
So how can bankruptcy help deal with constant collection attempts from creditors for medical debt? When you file, the automatic stay goes into effect which helps stop collection attempts while providing property protection. This means creditors cannot continue to pursue you for payment, garnish wages or take funds from bank accounts. Chapter 7 bankruptcy and Chapter 13 bankruptcy both have automatic stay protection. The next step in your filing will depend on which chapter you file.
Chapter 7 bankruptcy can eliminate outstanding medical debt including related lawsuits. This chapter is often filed by debtors who have little or no assets. If you qualify you can have medical debt wiped out and discharged. This means you are no longer legally responsible for the debt and creditors will be notified of this ruling.
Chapter 13 bankruptcy restructures outstanding debt into an affordable repayment plan that can last anywhere from 3 to 5 years. If you qualify for this chapter you may be required to pay a portion of the medical debt, and then have the remaining amount discharged or eliminated at the end of the plan. As long you make payments the automatic stay will remain in effect until the case is completed.
How to Set Up Your Own Medical Debt Settlement
It doesn’t take much for medical bills to become overwhelming and to cause financial strain on an individual. When the medical situation gets a little more intense the bills quickly skyrocket and many Americans then opt for bankruptcy as the only way to get away from that debt. There are few options when dealing with medical debt, you either file for bankruptcy and watch your debts fade away or you find a way to pay your medical debts and avoid bankruptcy.
Of the many ways to manage your medical debt and make it more affordable one very popular way to do that is through a medical debt settlement. This is a case where your healthcare provider agrees to accept partial payment rather than the full amount and then you determine what the payment plan will be.
Healthcare professionals seem to come out on the losing end of this deal as they often agree to writing off a chunk of the balance and in return they either get the amount they’re owed at a much lower rate or they accept a lump sum at a largely reduced rate. And even through it seems like healthcare providers aren’t getting a good deal, they are in a way. If you were to file bankruptcy they would receive nothing, and if those are your two choices, they’d rather get some portion of that money than none of it at all.
You can contact a medical debt settlement company to help you iron out the details, but there are some companies that offer this that are less than reliable. If you are organized and willing to speak to your healthcare provider you can set up your own medical debt settlement and get you back to peace of mind.
I Filed Bankruptcy A Few Years Ago Now I’m Drowning In Medical Debt…Help!
Falling back into debt after bankruptcy is horrible but it is not the end of the world. Post-bankruptcy debtors fall back into debt for many reasons; but one of the most common reasons is because they have medical bills they simply cannot afford to pay.
Tips for post-bankruptcy debtor if they have accumulated medical debt:
- Find out the true extent of your medical debt and check and see if you qualify to file bankruptcy again. Please note: You are not eligible to file Chapter 7 bankruptcy again until eight years after the date of filing for a previous Chapter 7 bankruptcy, or six years from the filing of a previous Chapter 13 bankruptcy . And you are not eligible to file Chapter 13 bankruptcy again until four years after filing a previous Chapter 7 bankruptcy, or two years after a previous Chapter 13 bankruptcy. If, according to the above rules you are not eligible to file bankruptcy again then you will need to work something out with your medical provider, ignoring the bills is not a viable option if you want to keep your fresh start intact.
- After you have gathered all of you bills, come up with a budget that could resolve your medical debt issue in less than a year. Can you pay few hundred dollars on the medical debt per month for the next 12 months? You would be amazed at how many medical providers are willing to work with debtors who want to work out payment plans or even settle the medical debt for less than the original amount. Luckily medical debt does not accumulate interest unless and until it goes to a bill collector.
- Don’t allow your debt to go to a bill collector. Even if you are unable to pay anything on your medical debt, contact your medical provider and let them know why you are unable to pay the medical debt. While they may not forgive the debt, they may lay off on trying to collect from you if they know you have no means (as in no income) to repay them.
Fight Medical Debt by Cutting Medical Costs
It is estimated that one in five Americans struggled with medical debt in 2011, a staggering thought when you consider you might be one illness away from mounting medical debt yourself. There are a number of different ways to handle medical debt and one of the best is before you even incur the debt. Health care is expensive, even for people who have health insurance so to avoid those expenses there are some things you can do to stay healthy and fight medical debt.
- Quit smoking – if you’re a smoker stopping can be one of the best things you do for yourself.
- Everything in moderation – Don’t deprive yourself of a treat you love and don’t overdo it on the exercise, take life in moderation and your body will thank you.
- Routine care – Make sure to visit your doctors as recommended for routine care, a small appointment now can save thousands if not more in more drastic care later.
- Shop around – No one said you had to keep using the same doctor for everything, if you find a better deal on something then switch doctors.
- Eat smart – You don’t need to be a dietician or know a lot about nutrition to get the basics down, less junk food and more fruits and veggies and you’ll be healthier.
- Exercise – Exercise doesn’t have to mean going to the gym and sweating, it could be something as simple as a walk after dinner every night, but get moving for better health.
The benefits of taking care of yourself and your health will not only pay out in the long run by helping you avoid costly medical bills, but they’ll make your life more enjoyable in a number of different ways.
How To Deal With The Financial Fallout Of A Medical Emergency
Medical emergencies don’t just cause us physical pain, they can also add to the emotional and financial stress of an already overburdened debtor. So what can a debtor do to minimize the financial fallout of a medical emergency?
- The first step to dealing with a medical emergency is to assess the financial damage. How much are the medical bills? Are you able to continue work? Maybe you need to cut back on your hours or you will need to leave your job completely. Whatever the case, you need to figure how this medical emergency has impacted your income in the short-term and the long-term.
- Communicate, communicate and communicate! Staying in touch with your creditors is important to minimizing the impact of a medical emergency. Contact your creditors and find out if they are able to defer payments while you are recovering from your medical emergency. Many creditors are willing to defer payments for about 90 days; but this type of deferment will only be useful if you know that you will be able to pay your bills after the deferment has lapsed. If your medical emergency will have long-term negative impacts on your income, then you may want to seriously consider filing bankruptcy. Bankruptcy will allow you to discharge most if not all of your unsecured debt and give you an opportunity to get a fresh new start.
- Take care of the essentials first. Even if you eventually file bankruptcy, you will still need to pay for your secured debts unless you plan to surrender your property in bankruptcy. If you have the income, redirect your money to your mortgage/rent and car note payments.
- If your medical emergency has created a created a large amount of medical debt, you may be able to get some of that debt reduced by talking to the hospital’s billing department if you’re uninsured. If however, you are unable to pay your medical debt, you may be able to discharge it in Chapter 7 bankruptcy or even repay part or all of it in a Chapter 13 bankruptcy repayment plan.