Medical bankruptcy is the term that describes one filing for bankruptcy due to costs from medical bills. It may include costs from a long hospital stay, medications, doctor’s bills, treatments and more. Patients who feel compelled to take such a step often have health insurance, but it is not enough. CNN reports that over 60% of U.S. filings are prompted by medical bills. Although declaring bankruptcy is a reasonable alternative for many, there are times when one should avoid it.
When you can pay off your medical bills without bankruptcy
Even when medical bills seem insurmountable, you may be able to pay them off, albeit slowly. First, you want to make yourself a budget and see if you can cut down your spending and/or increase your income to pay off more of the medical debt. If this measure allows you to pay off your medical debts without declaring bankruptcy then you should do so to avoid all of the penalties of bankruptcy.
The creditors of your medical bills know that if you declare bankruptcy, they are unlikely to get all of their money and may very well get none of it. Thus they may be willing to work with you if you contact them to tell them about your financial difficulties. Some will decide to just write off some of the charges. Others may give you a longer payment period. Call every creditor to see what can be done.
When you can consolidate your debt
Get your medical debt to a manageable level by consolidating it into one payment with a more favorable interest rate. Not everyone qualifies for such a loan, but if you can you may find a way that you can reasonably pay off your medical bills without declaring bankruptcy.
When there is nothing for them to take
Medical bills are unsecured debt. When you go to a hospital emergency room you do not pledge the home in which you live in return for services. Some people who have been ravaged by medical bills simply do not have assets. They may also not have any wages if the medical issues made them unable to work. When there is nothing for them to take, then creditors are less likely to sue you. There may be no reason to declare medical bankruptcy in this case. After time, debts are erased.
When the penalties are just too great
The penalties of medical bankruptcy are severe. One can lose assets if they are liquidated to pay money back to creditors. It will produce a great mar on your credit report. If you know that you will need to buy a house or make another purchase for which you need a loan, then avoid bankruptcy at all costs.
There is no specific filing that is termed “medical bankruptcy,” and it proceeds just as any other bankruptcy with the same advantages and disadvantages. Filing for bankruptcy because of medical bills should be a last resort. People should consider all of the alternatives before deciding to make this choice.
Resources:
http://articles.cnn.com/2009-06-05/health/bankruptcy.medical.bills_1_medical-bills-bankruptcies-health-insurance/2?_s=PM:HEALTH
http://www.bankruptcyonly.com/medical-bills-bankruptcy.php
http://www.bcsalliance.com/y_debt_medical.html