Getting Better With Medical Bankruptcy

In these painful financial times, the toughest bind facing many Americans is financing their well- being. While it’s vital to stay healthy and seek medical help when necessary, with health care costs on the rise and health care reform largely in limbo, the results of putting wellness over wealth can be financially devastating.

As the New York Times reported, (from the November 25, 2009, article “From the Hospital Room to the Bankruptcy Court” by Kevin Sack), many Americans are merely “one accident or illness away” from a “medical bankruptcy.” And while there is no medical bankruptcy per se—rather merely a standard filing that includes the wiping away of medical bills—more and more people are filing for bankruptcy because of these bills with the ubiquitous term “medically bankrupt” having become largely a sign of the economic times. “This has really become the insurance system for the country,” said Susan R. Limor to the New York Times in the same article. Limor is a bankruptcy trustee who calculated that 13 of the 48 Chapter 7 liquidation cases on her docket included medical debts of more than $1,000. Under Chapter 7, a debtor’s assets are liquidated and the proceeds are used to pay creditors; any remaining debts are discharged, and filers are left with a 10-year mark on their credit ratings.  “You can’t believe how many people discharge medical debts,” Limor said. “It’s a kind of trailing indicator of who’s suffering in this economy.”

And those suffering are not alone. According to a recent study from Harvard University, today medical bills make up well over half of all bankruptcy filings (62% in 2007), accounting for the bankruptcies of between 1.5 to 2 million Americans each year. Moreover, of those filing for bankruptcy, three-quarters have medical insurance.  In many cases, this crippling debt is the result of insurance co-pays and deductibles, which can run into the tens of thousands of dollars. Yet, some who file for “medical bankruptcy” do so even with relatively small medical bills because, left to their own devices, many hospitals and medical practices refuse to make arrangements for debt relief or installment plans.

As such, the alternatives to a medical bills-inspired bankruptcy can be worse. Medical debt—from hospitalization to medication—is unsecured with no guarantee available for creditors, like insurance companies, hospitals and doctors, to take back. As a result, without filing medical bankruptcy, health care debts can be tied to the collateral you do own. A hospital or insurance company can also garnish your wages, and even claim a portion of the equity in your home, business or other large assets.

As the New York Times article illustrated, if you’re plagued by medical debts and other related health care costs, Chapter 7 bankruptcy may be the only viable solution for you. Filing for Chapter 7 can eliminate most of your debts, including those arising out of medical expenses—whether they’re billed from your hospital or charged on your credit card.  An experienced attorney can evaluate your precise financial problems—medical or otherwise—and work out how the implications are likely to affect you. You’ll also learn the best ways to most effectively deal with creditors, along with possible solutions to improve your credit scores and credit ratings so that any effects of the bankruptcy might be minimized. The same lawyer can help you file for bankruptcy, as well as represent you in the bankruptcy court. For more information about the benefits of filing for bankruptcy, including alleviating medical debts, visit the experienced attorneys of The Law Offices of John T. Orcutt online.