April 1, 2020

Medical Bills and Bankruptcy

According to a Harvard study recently reported in the LA Times, medical bills played a role in 62% of all bankruptcies filed in 2007, which is up 7% from 2001. Interestingly, a large majority (78%) of these filers even had health insurance.

When someone is burdened with medical problems, multiple other issues arise that contribute to why they would need to file for bankruptcy. Along with extremely high medical bills, lost wages from having to take days of work off all are also major factors.

The study also revealed a fact that challenges the negative stigma often associated with filing bankruptcy. Approximately 70% of the people that filed bankruptcy for medical reasons owned homes, and the majority had gone to college. It is finally becoming realized that there is no shame in filing bankruptcy, as so many filers these days are middle class and financially stable before medical reasons push them into bankruptcy.

Medical problems can occur suddenly and can hit hard. And they can happen to anyone. Health insurance is not a guarantee that injuries or illness won’t burden you with out-of-control debt, and it’s almost impossible to plan for the unexpected.

If you are filing medical-related bankruptcy, medical bills are considered unsecured debt and will be discharged entirely if you are filing Chapter 7 bankruptcy. If you are filing a Chapter 13 bankruptcy, your medical bills can be ordered and combined with other debts, and potentially reduced, in a bankruptcy trust. In either case, bankruptcy may be just what you need to eliminate your debt arising from medical bills and help you get back on your feet again.

The top 10 reasons to file bankruptcy

Here are some top reasons why people file for bankruptcy, and also a discussion of how filing for Chapter 7 or Chapter 13 Bankruptcy can help.

1. I filed to eliminate the legal obligation of paying off my debts.debt

This process of wiping the slate clean is called a discharge of debts. The goal of a discharge is to reduce debt to give you a fresh start. Whether it is through total elimination of debt via a Chapter 7 Bankruptcy, or through reorganization of your current debt via a Chapter 13 Bankruptcy, most or all of your current debts will be addressed.

2. I filed to stop foreclosure on my house and effectively make payments to catch up on missed payments of my mortgage.foreclosure

If your home is in foreclosure, Chapter 13 Bankruptcy will stop the foreclosure any time prior to the sale. Bankruptcy does not eliminate mortgages on your property without payment. Rather, bankruptcy will structure a payment plan (usually lasting 5 years) in order for you to repay your mortgage the amount that you are behind.

3. I filed to prevent my car or other property from being repossessed.repo

Like foreclosure, repossession is another big reason people file bankruptcy. The past payments you have missed on your car or other personal property will be consolidated into your Chapter 13 Bankruptcy plan. After this you will no longer pay the finance company, rather you will make monthly payments to the trustee of your Chapter 13 Bankruptcy who will then pay the finance company.

4. I filed to reduce (or even eliminate) high medical bills.bills1

Sometimes people get blind-sighted by an accident or an illness which can prove to be an expensive affair. Filing Chapter 7 Bankruptcy can greatly reduce the amount of those expensive medical bills.

5. I filed because I recently lost my job and am now unemployed.unemployment

According to studies, loss of work is one of the most common reasons people file for bankruptcy. Losing a job is closely tied to high medical bills and can mean that a family may be left without the protection of insurance that was once provided by their employer. Often times these two factors combined create an almost impossible situation to get out of without the help of bankruptcy.

6. I filed to stop the harassing behavior from creditors.creditors

Often, creditors will persistently call the home of a particular debtor with demeaning and abusive behavior. Not only are these actions unethical, they can be unlawful. Bankruptcy will put on hold the demands of many creditors and stop their distressing behavior.

7. I filed to prevent my utilities from being shut off (or to restore already cut-off utilities)utilities

If you have been failing to pay the utility companies, then there’s a good chance your utilities may be in risk of being terminated. Filing bankruptcy can prevent the utility company from shutting off your utilities.

8. I filed to get help for large amounts of student loan debt.student-debt

While it is true that your student loans will not be eliminated like several other types of unsecured debt, bankruptcy can at least consolidate your student loan debt. This consolidation will allow a debtor to make monthly payments through Chapter 13 Bankruptcy that are within the financial ability of the debtor.

9. I filed to end wage garnishments.wage-garnishment

Chapter 7 Bankruptcy can stop those wage garnishments which take away some of your weekly earnings – often times leaving you without necessities. Chapter 7 Bankruptcy allows you to purchase necessities for you and your family and Chapter 13 Bankruptcy will also help if you face wage garnishment.

10. I filed to challenge certain claims of fraudulent creditors.creditor-fraud

Bankruptcy will allow you to challenge the fraudulent claims of creditors who are trying to collect more money from you than you really owe, or those creditors who are using illegal practices to collect your money. An experienced bankruptcy attorney can provide the expertise you will need to stop these creditors. A good bankruptcy attorney can often even the playing field between a big creditor and a single debtor. Filing bankruptcy with an attorney can stop fraudulent reporting by a creditor.