Filing Bankruptcy Due to Medical Bills Is Becoming Even More Common

Posted by Wesley Scott on May 12, 2015 at 10:00 AM
Wesley Scott

medical_bills_2As medical costs continue to rise, the ability for individuals to pay off their medical bills is becoming increasingly difficult. In fact, fifty-six million people under the age of 65 will have trouble paying their medical bills this year. These unpaid medical bills and expenses result in three out of every five bankruptcies filed in the United States. Even for individuals who are covered by health insurance, 10 million of those individuals have medical bills that they cannot afford to pay after insurance has paid its portion. For these individuals, filing bankruptcy due to medical bills may be their best option. 

What is a Medical Bankruptcy?

The term “medical bankruptcy” is not a legal term; however, many people refer to their bankruptcy case as a “medical bankruptcy” when the reason for filing bankruptcy is directly related to unpaid medical bills. Many times the person is also behind on other bills because he or she has been struggling with a medical condition that has caused them to be out of work. The decrease in the person’s income has led to substantial debt in addition to the medical bills; therefore, the person has few options to resolve his or her debt problems other than filing a bankruptcy case. A bankruptcy case will discharge the person’s other unsecured debts in addition to the unpaid medical bills to offer a fresh start to rebuild and recover following a medical crisis.

Who Files a Medical Bankruptcy?

Filing bankruptcy due to medical bills a affects people from all walks of life. Anyone can get sick or have an accident at any time that results in thousands, if not hundreds of thousands, of dollars in medical bills and expenses. Even with the best insurance, a person could face thousands of dollars in co-pays and uninsured medical costs that they simply cannot afford to pay. In many cases, the person is out of work due to the illness, which only makes matters worse. For some individuals, they can afford to continue paying their bills and living expenses because they have savings, retirement funds, or other assets to liquidate as they fight a medical battle (this is not recommended); however, for many, this is not the case. Eventually, even those individuals with substantial wealth deplete their resources and must consider filing for bankruptcy relief.

For example, John and Gloria were in their 30s when Gloria had a stroke. They had two small children, a brand new home, and two new cars. Financially, they were doing everything correctly - contributing to retirement, paying down debt, funding an emergency savings account, and living within their means. Both had well-paying jobs at the time and had accumulated a substantial amount of savings. The stroke was unexpected and took them by surprise leaving them in a financial crisis as well as a medical crisis.

Gloria made a full recovery; however the medical bills ran into the hundreds of thousands of dollars. While John had excellent medical insurance, the policy had a substantial deductible and a 30% co-pay. During her recovery, Gloria was unable to work; therefore, the couple’s income was dramatically decreased. It was a full year before Gloria was able to return to work and unfortunately she had to accept a job earning less than she did prior to the stroke. The couple’s income barely covered their living expenses much less any bills.

Faced with losing their home, the couple turned to a bankruptcy attorney for help. By filing a bankruptcy case, John and Gloria were able to eliminate their unsecured debts, including the medical bills, so they could concentrate on rebuilding their finances and keep their home.

 

If you are struggling with debt and believe you may need to file bankruptcy due to medical bills, sign up for a free bankruptcy consultation to determine if filing bankruptcy is the best way to resolve your debt problems. We will discuss all available consumer debt solutions to help you reach a decision that is in your best interest.

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Topics: Bankruptcy

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