How common is it to file bankruptcy for unpaid medical bills?
In the United States, the cost of healthcare is skyrocketing and remains one of the biggest financial obligations that most people have. According to the Centers for Medicare and Medicaid, national healthcare spending may reach $6.2 trillion by 2028.
Many patients today are overwhelmed by the burden of paying their hospital bills, which begs the question, how common is it for people to file for bankruptcy due to significant medical debt?
In a study published in 2019, researchers found that 66.5% of all bankruptcies were filed because of serious medical debt or lengthy periods spent away from work. About 530,000 families every year file for bankruptcy because of costs associated with medical issues.
Has The Affordable Care Act Reduced The Burden Of Medical Bills?
The American Journal of Public Health says that even though the ACA has improved access and coverage, the number of people drowning in medical bills is still high. If anything, the percentage of debtors that cited medical issues as part of their liabilities rose from 65.5% to 67.5% in the last three years.
The reason why these numbers remain high is the lack of adequate health insurance. The coverage most citizens can afford or obtain from their employers is hardly sufficient for simple emergencies, let alone serious illness that requires lengthy hospital stays.
Does ‘Medical Bankruptcy’ Exist?
Attorney Jerry E. Smith says medical bankruptcy is not a legal definition in bankruptcy laws. If you are left with no alternative than to file due to medical debt, the law will treat this kind of debt as it would debt accrued due to personal loans, credit card debt, and money borrowed from friends and family.
Unfortunately, you do not get to choose among the debts to include in your filing. If you need to get relief from medical debt, you will have to get rid of all other unsecured loans.
In addition to all other kinds of debt you have, you will also list your personal property including real estate and family income. The law will require you to list all family expenses even though your family is not filing with you, and other aspects of your financial life; such as recent asset transfers, sales, and marital status.
What Are The Consequences Of Filing For Bankruptcy?
Bankruptcy is a complex legal process with both positive and negative consequences. A qualified consumer bankruptcy attorney can help you figure all these issues out and answer any questions you may have.
Getting professional advice regarding all possible outcomes should help determine the best way to proceed. However, before consulting a lawyer, here are a few basic points that you should have:
- Debt Discharge
Declare bankruptcy results in a discharge of the debts you have previously incurred. Discharge is where a bankruptcy court hands a permanent order barring all creditors from collecting on debts you owe.
Credit card debt is one of the most commonly discharged forms of debt. The court considers the serious impact debt can have on an individual and believe that credit card companies can survive the bad debt of one client. Medical debt charged to a credit card can also be discharged.
- Automatic Stay
The order issued by the bankruptcy court is also a preliminary court decree. This means that you are protected from creditors, and they can no longer send you collection notice via email or make calls regarding your medical debt.
An automatic stay also protects your property, but it can be lifted as the court deems fit.
- Your Credit Score
Filing for bankruptcy even because of medical bills will depress your credit score for up to ten years, which means that you will be regarded as a risky borrower. If you find a loan you are eligible for, the interest may be too high. Bankruptcy may help discharge the debt, but will not erase its history.
Involving the bankruptcy court means that your financial life will become a matter of public record. Your friends, family, employers, and clients will be able to determine how much money you owe, family incomes and expenditures, personal asset values, and so much more.
The only things that will remain private are your social security number and tax ID that are listed only by their last four digits.
- Possible Loss Of Private Property
The most serious impact will be on your home and other properties, which the bankruptcy trustee can possess to repay your loan.
If My Medical Loans Are Discharged, Will I Lose Access To Medical Services?
Many patients worry about the impact their inability to pay their loans will have on their relationship with their doctors, especially once the debt is discharged. The Emergency Medical Treatment and Active Labor Acts of 1986 protect you by preventing hospitals from refusing treatment to patients that are unable to pay.
Your doctor may refuse to see you after their debt is discharged, but most doctors and hospitals rarely take such drastic action. They understand why you filed for bankruptcy and will treat you if you can pay your medical bills going forward. Even if your doctor refuses to see you, you can always seek medical assistance elsewhere.
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