Life doesn't always go as planned. Things happen that we don't expect to cause our life to change in the blink of an eye – car accidents, cancer and other illnesses that cause a long hospital stay. Anyone who has been in the hospital knows how quickly the bills can pile up. Even with health insurance, the cost of medical bills can be staggering. Some people use up their entire savings to try and pay off their medical bills. Many people spend so much money paying off their bills that they are unable to pay for basic necessities like rent, food, and utilities.
In 2013, health care was the number one cause of bankruptcy filings in the United States. 2014 is shaping up to be the exact same. Unpaid medical bills result in many people filing for bankruptcy every year. If you're lost under a pile of medical bills, here's what you need to know about filing for medical bankruptcy:
Can I File for Bankruptcy Just for Medical Debt?
Unexpected medical bills can pile up quickly. Even people who have a handle on their regular debts may not know what to do when they're suddenly hit with a large medical bill. Many people wonder if they can file for bankruptcy just for their medical bills and not include their credit cards or other debts. In bankruptcy, credit cards and medical debts fall into the same category, unsecured non-priority claims, and are treated equally.
Medical bankruptcy is a term used to describe a bankruptcy in which the majority of debts are medical-related, but there's no way to file bankruptcy on medical bills alone. When you file for bankruptcy all unsecured debts, such as credit cards and medical bills, are treated the same way. You are unable to pick and choose which creditors will be paid and which debts are discharged.
What About Ongoing Medical Costs?
Sometimes, people have to deal with long-term hospitalization or have conditions that require multiple surgeries. Bankruptcy will only get rid of the debt you've acquired up until the filing date. If you know that you're going to incur more medical debt, you may need to wait until your treatment is completed to file for bankruptcy.
What Options Are There Besides Bankruptcy?
There are non-bankruptcy options for dealing with medical bills, and you may find that some of those options are better for you than filing for bankruptcy. If you already have good credit, filing for bankruptcy may not be the best option. You may be able to negotiate a settlement with the healthcare provider. Hospitals routinely waive or discount bills to patients who are uninsured or who can't afford to pay back their bills. Individuals with a certain level of income may qualify for free or reduced hospital care under the Hospital Care Assurance Program (HCAP). Additionally, the Affordable Care Act requires certain non-profit hospitals to provide free or low-cost coverage to low-income individuals.
Eliminating Medical Bills With Bankruptcy
If your medical bills have become unmanageable and you can't settle your debts with the hospital, bankruptcy may be your best option. All of your medical bills from the doctors, hospitals, and labs are considered unsecured debts in bankruptcy. In Chapter 7 bankruptcy medical debts, like other unsecured debts, will be wiped out. If you don't qualify for Chapter 7 bankruptcy, you can file for Chapter 13 bankruptcy. In Chapter 13, you will most likely have to pay back a portion of the medical debt through your repayment plan, and the rest will be discharged.
If you're unsure about whether bankruptcy is right for you, the best thing you can do is to meet with an experienced bankruptcy attorney. They'll be able to look over your case and advise you on your best option.