There are lots of reasons that people file for bankruptcy. One very common reason is because they have lots of medical debt. Medical services can be very expensive, particularly for those who have no or little insurance. Medical debt is considered general unsecured debt, just like credit cards and personal loans that are not secured by any collateral. This type of debt can be completely wiped out by a bankruptcy discharge.
For this reason, people whose primary debt is general unsecured debt, like medical debt, are generally best served by filing a chapter 7 bankruptcy, which will wipe out all their medical debt within a few months after filing for bankruptcy. However, if the personal has non-exempt property (property not protected from being sold to pay creditors), or other issues (i.e. they are behind on their mortgage), a chapter 13 bankruptcy may be a better option for them. In a chapter 13, the debtor makes payments towards their debts in a 3 to 5 year plan. In such a plan the medical debt, like the other general unsecured debt will paid, in part, if at all, during the course of the plan, and the remaining amount of debt will be discharged upon completion of the plan.
People are commonly concerned about whether they will be denied future medical services because they file bankruptcy. Under law, people cannot be denied emergency medical services just because they file for bankruptcy. However, providers can deny non-emergency services after a bankruptcy is filed, at their discretion.
While smaller private providers may deny service if you had debt owed to them discharged in bankruptcy, larger providers are more likely to continue providing services after a bankruptcy. All creditors must be listed in the bankruptcy, whether you want to continue using their services or not. This is an important consideration when trying to decide whether to file for bankruptcy. Often times, the benefits of eliminating lots of medical debt greatly outweigh any risk of being denied medical treatment after a bankruptcy.
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This is a very general overview of how medical debts are handled in a bankruptcy. When considering filing for bankruptcy, one should speak with an experienced bankruptcy attorney to determine how a bankruptcy would work, given the particular facts and circumstances of their case. See us at LifeBackLaw.com.