What is a Medical Bankruptcy?
As Americans, we know how expensive healthcare can be. A trip to the emergency room can cost thousands of dollars. A major surgery? Try $100,000 or more.
In the United States, roughly 3 million Americans owe more than $10,000 in medical bills. Those who have a chronic condition or disability especially struggle with debt.
While medical bills have now been banned from credit reports, consumers may still be harassed about their medical debts. What can they do to get peace of mind? They can file for bankruptcy.
You may have heard of medical bankruptcy. While it is not a formal type of bankruptcy, it occurs when someone has excessive medical debt. When a person can’t get relief from their mounting debt, they may file for Chapter 7 bankruptcy to eliminate this debt.
Medical debt is common, with more than 60% of bankruptcies involving significant medical debt. But is filing for bankruptcy the right choice?
The thing is, you cannot single out creditors. Bankruptcy can get rid of medical debt, but you cannot simply ignore the debts you do not want to deal with. So, you need to have other debts in order to make a medical bankruptcy worth your while.
Before you do anything, you should assess your debt. Review medical bills, insurance coverage, and any possible errors in charges. Next, try to negotiate with providers for reductions or payment plans.
Bankruptcy should be used only as a last resort. First, explore alternative options, such as debt consolidation, negotiating with providers, or seeking financial assistance.
Once you take these steps, determine what you owe and see if medical bankruptcy is the right option for you. Keep these factors in mind:
- Debt amount. If your medical debt is overwhelming (typically more than half your annual income) and unmanageable despite negotiations, bankruptcy might be a viable solution.
- Repayment ability. If you have exhausted payment plans, financial aid, or debt settlement options and still can’t afford payments, bankruptcy may be necessary.
- Impact on assets. Chapter 7 bankruptcy can discharge medical debt but may require selling non-exempt assets. Chapter 13 allows repayment over time while keeping assets.
- Credit score considerations. Bankruptcy significantly impacts your credit for 7 to 10 years. If you can repay debts gradually, that might be a better alternative.
- Legal protection needed. If you are facing lawsuits, wage garnishments, or aggressive collections, bankruptcy can provide relief and protection.
Contact Us Today
Medical bills can get expensive quickly. An overnight stay in the hospital can easily result in tens of thousands of dollars in debt.
When medical debt gets overwhelming, bankruptcy might be the best option. Having experienced South Florida bankruptcy attorney Brian K. McMahon, P.A., on your side can mean the difference between a clear financial future and a cloudy one. We’ll help you avoid common mistakes. Schedule a consultation today by filling out the online form or calling (561) 658-1789. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.