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Bankruptcy and Surviving the Medical Costs of Major Illness

Facing a major medical issue, such as cancer, a debilitating accident, or any health issue that requires long-term care, can be financially devastating, even with insurance. The treatment and hospital stay bills can quickly reach the hundreds of thousands of dollars, and while insurance will pay for a portion of these expenses, the patient is responsible for a substantial amount. These numbers can quickly overwhelm the finances of most people, and relief in the form of bankruptcy is sought by many to curb the financial flood. In fact, medical bills are the leading cause of bankruptcy among Americans, though the percentage is down from the high experienced during the recession of 2009. Bankruptcy is not an easy decision, and there are certain considerations a person should keep in mind when medical bills are the primary reason bankruptcy is necessary. A discussion of how medical bills are treated in the Chapter 7 bankruptcy process, the type most frequently used by those dealing with debts of this kind, will follow below.

How is Medical Debt Classified?

Chapter 7 bankruptcy is commonly referred to as consumer bankruptcy because it is principally designed to eliminate a debtor’s consumer-based, as opposed secured or business-based, debt. Medical bills fall into general unsecured debts, like credit cards, and are eligible for discharge in bankruptcy. One important consideration to make during this process is the fact that a debtor cannot limit a bankruptcy to medical debts, and must list all debts and liabilities, personal property, and real estate in the bankruptcy petition. Other debts eligible for Chapter 7 discharge would also be eliminated for the consumer, including credit balances, personal loans, and any other borrowed money.

A spouse’s income, even if he/she is not filing for bankruptcy, as well as household expenses and assets, must also be provided, requiring the debtor to reveal very personal financial information. State and federal bankruptcy laws do exclude certain property from the bankruptcy estate, which is crucial for Chapter 7 cases, as non-exempt property may be liquidated by the bankruptcy trustee for distribution to creditors. Consequently, it is important to consider whether the types of property a debtor owns are primarily exempt or non-exempt assets before electing Chapter 7 bankruptcy, information an experienced bankruptcy attorney is best suited to provide.

Effect on Future Medical Treatment

One additional concern many people pursuing bankruptcy for medical-based debt is the impact of this decision on future medical treatment with current providers. Most health professionals understand how expensive these services are, and realize that some individuals simply do not have the means to pay the bills. Thus, if a medical debt is discharged in bankruptcy, the majority should not take it personally, and continue to work with the patient. Of course, a doctor can terminate the doctor/patient relationship in the wake of the patient’s bankruptcy, but there are always other providers one can use. Losing a particular doctor may be inconvenient, but is not a true block to future quality medical treatment.

Talk to a Bankruptcy Attorney

Dealing with any amount of overwhelming debt is hard, but medical bills are especially difficult to address, since they can rarely be avoided once a serious issue emerges. Christopher L. Arrington knows the stress you are facing, and can help you explore possible sources of financial relief. If you have questions about bankruptcy, contact our Danville law firm to schedule an appointment.



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