12 May 2012

Bankruptcy and Medical Issues

What is the impact that health issues have on a person’s decision to file for bankruptcy.  Recently I have had more and more clients who have had severe health issues and excessive medical bills.  We have been able to help many clients who were drowning in medical bills by filing Chapter 7 bankruptcy.

First, if you have not had any medical issues I urge that you go out and purchase health insurance.  If you already have medical bills what are you supposed to do when medical bills pile up and you don’t see any way to ever pay them off?  Is bankruptcy an option to deal with insurmountable medical debt?

The high cost of medical care, lack of health insurance, unexpected illness and disability and chronic medical conditions have caused many Americans to fall deeply into debt.  Even if you  have always been the type of person who paid their bills on time and didn’t make unnecessary purchases, no one is immune from the financial nightmare that even one unexpected illness or injury can cause.

More than a million people file for bankruptcy every year, and national statistics show that more than half of them have experienced some kind of serious health issue.  A study by Harvard University researchers on medical bankruptcy found that 62% of all personal bankruptcies filed in 2007 were the result of medical problems.  Even more surprising was that 78% of those filers had medical insurance at the start of their illness or other medical problem.  60.3% of the 78% had private health insurance, not Medicare or Medicaid.

What happens to these medical debts when a bankruptcy is filed?

The answer is that it is treated the same as other “unsecured debt”, which is debt that does not have any collateral attached to it, such as most credit card bills and personal loans.  When someone files a Chapter 7 their unsecured debts are 100% wiped out, or “discharged”(some unsecured debts are not discharged such as student loans).  This includes all medical bills.  If a Chapter 13 is filed, all unsecured creditors are repaid the same percentage of the debt, which is determined by your income and other factors, and the remaining balances are discharged.

It is important to tell your Attorney about all of your pre-filing medical bills, even if you have not yet received the bill or know what the amount you owe will be, so that they are notified of the filing.  Although Chapter 7 bankruptcy is usually considered “all inclusive”, there are some cases where the debt is not dischargeable if the creditor was not notified.  It also costs money to add creditors to the Petition once the case is filed.

Hundreds of thousands of people file bankruptcy each year due to insurmountable medical bills.  There is nothing to be ashamed of if you are considering filing as well.  The Federal Government recognizes the financial hardships many Americans face at one time or another, which is why bankruptcy is an option.

If you are considering filing bankruptcy due to medical bills or other reasons, it is important to retain an Attorney who can use their experience and legal knowledge so you can obtain a successful discharge and a fresh financial start.  Please contact The Ranchod Law Group in Sacramento at 916-313-9069 or via email at info@california-bankruptcyattorney.com

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