Medical Bills and Bankruptcy
A serious illness can result in serious medical bills. In fact, CNN reports that more than 60% of people who file for bankruptcy file because of overwhelming medical bills. Most of those who file for bankruptcy are middle-class, well-educated homeowners. And, three-quarters of the people with a medically-related bankruptcy had health insurance.
It’s scary to think about, but many people are just one illness away from financial ruin.
In the study, researchers found that 62.1% of a random sample of bankruptcies were medically related because individuals:
- Had more than $5,000 (or 10% of pretax income) in medical bills
- Mortgaged their home to pay for medical bills
- Lost significant income due to illness
Before looking at bankruptcy, you can talk to the hospital about a payment plan. Sometimes, however, these plans are still too costly per month and the hospital may be inflexible. At this point, if you don’t qualify for hardship or financial assistance through the hospital or one of its foundations, it may be time to consider filing for bankruptcy.
Medical bills are unsecured debt, meaning they aren’t tied to property. Another common type of unsecured debt is credit card debt.
Bankruptcy allows you to discharge medical debt or pay it off over time with a payment plan you can afford. Medical debts can be discharged completely in a Chapter 7 bankruptcy. There is no limit to how much debt can be discharged. If you’re not eligible for Chapter 7, you can file for Chapter 13 and start a repayment plan. Once a repayment plan is complete, your debts are discharged completely.
Harold Shepley & Associates is a full service debt relief law firm and can answer any questions you may have about medical debt and bankruptcy. Contact us today for a free consultation.
March 29, 2012 Posted in Bankruptcy, Chapter 13, Chapter 7, Debt Tagged chapter 13 bankruptcy, chapter 7 bankruptcy, medical bills, repayment plan, unsecured debt Leave a comment
