Academic researchers estimate that 66.5% of all bankruptcies are tied to medical issues such as the high costs for medical care or spending time off work due to sickness. It has also been estimated that 530,000 families cited medical issues and bills as playing a role in their need to file for bankruptcy. The GoFundMe.com CEO even stated that 1/3 of their website’s donations have gone towards medical bills. There is a healthcare crisis and Americans are struggling.
Whether you have a chronic illness, had an unexpected accident, or caught a debilitating virus, medical bills can quickly stack up. When healthcare expenses consistently come in and you have no means to pay for them, you fall deeper and deeper into debt.
We want you to know that there is hope and you can find relief from your medical bills.
The Facts About Medical Bankruptcies
While a medical bankruptcy isn’t an official legal term or type of bankruptcy, many bankruptcies are based on medical-related debts. Medical bills are a huge financial hardship and cause many individuals to file for bankruptcy relief.
Many bankruptcy clients ask if they can include medical debt and the answer is yes. Medical debt is treated as an unsecured debt and it is included within a discharge.
Filing Chapter 7 for Medical Bills
Chapter 7 is what many people think of as a traditional bankruptcy filed by individuals. It allows you to permanently eliminate debt like credit card debt and medical bills. In return for the removal of your debts, you may, in some situations, have to give up non-exempt assets, which can be liquidated (sold off) by the bankruptcy court to partially repay your creditors. But, every case is different and most Chapter 7 cases do not involve having to give up any assets.
Filing Chapter 7 bankruptcy is a way to get significant debt relief and start over with a clean financial slate. The entire process takes about three to six months (with protection kicking in on day one), which can be an excellent way to provide quick debt relief.
Filing Chapter 13 for Medical Bills
Chapter 13 reorganization may be a viable debt relief option if you are currently unable to pay your medical bills but feel like you could pay some or all of them with more time. Under the Chapter 13 bankruptcy reorganization process, you can modify your existing debt payments by reorganizing eligible debt into a new three to five-year repayment plan.
Obtaining Relief from Your Medical Debt
While there isn’t a bankruptcy option that only clears your medical debts, there are multiple forms of bankruptcy that can provide relief for healthcare expenses and creditors.
This means there is hope and help is available.
Our experienced bankruptcy lawyers can help you sort out your options and determine which type of bankruptcy offers you the best protection. We can help you decide which bankruptcy options are best for you and we can provide a helping hand to guide you through the process. We service clients throughout Nebraska and Iowa and we are here to help.
Contact us to speak to one of our experienced bankruptcy lawyers or to arrange a free initial consultation. If you cannot come to our Omaha offices, we can consult with you by telephone. We are able to help you no matter where you may live in Nebraska or Iowa.
Medical Bankruptcy FAQs
Yes, you can declare Chapter 7 or Chapter 13 bankruptcy on medical bills. Your bankruptcy attorney can help you determine which type of bankruptcy is best for your specific financial situation.
You can discharge an unlimited amount of medical debt when filing for Chapter 7 bankruptcy. Chapter 13 bankruptcy has a maximum debt limit of $419,275 for unsecure debt, which would include medical bills and other debt like credit cards.
Hospital emergency rooms are required by law to treat patients regardless of their ability to pay, however, you could be denied care at a doctor’s office due to unpaid bills, yet this has rarely been a problem for most clients.
Yes. Hospitals and healthcare providers can send your account to a collection agency. To prevent medical bills from going to collections while you’re making payments, set up a payment arrangement with the provider and get it in writing. If you owe way too many medical bills, then it is time to consult with a bankruptcy attorney.
While filing for a medical bankruptcy may damage your credit report, the reality is, you most likely are already struggling to pay your bills and you have late payments. This means you’ve already reduced your credit rating and the bankruptcy process can help you stop the cycle of late payments and fees.
Each state has different rules as to how long a creditor can sue for a medical bill, which is normally five years in Nebraska and Iowa from the last date payment made.
Outstanding medical bills that have gone on to a collection agency typically only stay on your credit report for 7 years, however, that does not mean that those medical bills are not still due. The bills are only removed (legally not enforceable) if you pay them in full, they are removed by the provider, or you file for bankruptcy.
Also, as mentioned above, if a creditor waits too long to file a lawsuit, typically after five years from the date of last making a payment, then the statute of limitations provides you with a legal defense.
A hospital, doctor, or collection agency can charge interest if this was part of your original contract for services. They generally cannot charge interest if it was not specifically stated at your time of services. If a judgment is entered against you, then the court normally allows for a small amount of post judgment interest.
Yes. Medical providers and their collection agencies may waive a percentage of the outstanding medical bills. Many hospitals and medical providers routinely waive or discount bills for uninsured patients.
Medical bankruptcy cases tend to be less expensive than those filed primarily for other debt reasons. While a medical bankruptcy is really just a regular Chapter 7 or Chapter 13 case, they tend to involve fewer assets and lower income households. A bankruptcy attorney will give you a fair quote based on the time and expertise necessary to successfully complete your case.
There is a natural empathy for people that need to file bankruptcy because of medical bills and therefore some of the lowest priced cases tend to be those caused by medical bills.
When you think about the total cost, consider that about the first $400 or more is not for attorney fees, but for court costs (currently at $338 for Chapter 7) and bankruptcy specific credit reports, which can be upwards of $40 each. If, for example, an attorney quoted you $1,600 for a medical bankruptcy, the actual attorney fees would really be around $1,200. Prices do vary depending on the number of creditors and the amount that you owe, your income, the value of your assets and generally how much time will be necessary to properly file your case.
If you have an ongoing medical problem, then Chapter 13 may be a much better option that you should discuss with your attorney.
Your bankruptcy lawyer will provide a complete list of documentation to assemble and this will include items such as your income, expenses, creditors and outstanding debt, and assets like a home or car. This information will help the attorney better understand your unique situation and guide you on the best approach to obtaining debt relief.
You are not required to have a bankruptcy attorney, however, know that there are risks associated with going it alone. Bankruptcy law is very confusing and court employees cannot provide guidance or offer legal advice. This is why your bankruptcy lawyer is important. An attorney can educate you on the process, help you determine which type of bankruptcy is best for your unique situation, answer questions about the law or process, help you complete the necessary forms and paperwork, and explain other pitfalls for the unwary.