Medical bills can quickly become extremely costly. If you’ve been sick or injured and required serious medical treatment, your statement will likely shoot into the thousands. It’s easy to feel overwhelmed about the outstanding bills you owe, and you may think you’ll never be able to pay it off. However, you are not alone.
A study by the American Journal of Medicine found that 62.1% of all bankruptcy cases stem from medical reasons. Over 92% of the people filing bankruptcy for medical purposes have an outstanding bill of $50,000 or more.
Inability for people to pay off their medical debt often leads them to turn to bankruptcy for relief. If you are considering filing for bankruptcy due to medical reasons, there are a few things to consider before you make a final decision.
Does “Medical Bankruptcy” Exist?
Though hundreds of people file bankruptcy due to medical reasons, “medical bankruptcy” does not exist. When you file for bankruptcy, you do not limit yourself to outstanding medical bills. Medical debt is categorized alongside all other forms of debt you may have. This debt includes:
- Credit card debt
- Utility bills
- Personal loans
- Borrowed money
Debt from medical bills is typically considered “unsecured debt.” Unsecured debts are loans in which the debtor does not provide any collateral for the loan. When you declare bankruptcy, you will take care of all unsecured debts.
On the flip side, secured debts are loans that require collateral in exchange. Common examples of secured debt are:
- Home mortgages
- Car loans
Can Medical Bills Get Wiped Out From Bankruptcy?
There are two types of bankruptcy that people can file: Chapter 7 and Chapter 13. The claims process for each differs, so filing the correct claim is essential. You should thoroughly understand the differences between the two types of bankruptcy to make an informed decision about which type of claim you need to file to resolve medical debt.
Chapter 7 Bankruptcy
This type of bankruptcy often results in medical bills becoming discharged (forgiven). When debt is discharged, the debtor isn’t required to pay anything. However, not all debts in a bankruptcy case are dischargeable. Those that aren’t dischargeable require ongoing payments even after the bankruptcy case is over.
The bankruptcy court may also require debtors to sell certain assets as a condition of the bankruptcy. You can keep your property if you can claim an exemption on it. Qualifications for exemption differ in each state.
Not everyone will qualify for a Chapter 7 bankruptcy case. To learn if you are eligible or not, contact an experienced bankruptcy attorney in your area.
Chapter 13 Bankruptcy
Chapter 13 and Chapter 7 are significantly different when it comes to medical debt. While Chapter 7 bankruptcy typically lasts around four to six months, Chapter 13 bankruptcy can last three to five years. Chapter 13 is a restructuring bankruptcy. Rather than selling assets to pay off debt, Chapter 13 creates a payment plan to pay back debts over a few years.
In this case, debtors pay off unsecured debts with the amount Chapter 7 would have awarded them. The specifics of your medical bills and bankruptcy case determine how much you have to pay. Sometimes, unsecured debts, such as medical debt, will be discharged. Other times, debtors have to pay a significant amount of the medical bills they acquired.
It’s worth noting that you cannot pick and choose which debt to pay off when filing bankruptcy. Bankruptcy code treats all debts equally. Consult a reputable attorney to learn about the best course of action for your bankruptcy case.
Steps to Take to Lower Medical Costs
Of course, it’s nearly impossible to plan for a medical emergency. However, if you do end up in the hospital and know you’ll acquire a hefty medical bill, there are some tips to lower your costs before and after receiving care. Here are five ways to reduce medical costs:
- Know the Cost – There are various resources you can use to see the real cost of medical care. Most medical insurance providers list their negotiated prices on their website. You can also use sites like Healthcare Bluebook to see what the “fair” price is for medical procedures and other costs. Once you see the negotiated price compared to the “retail” price, you can determine how much you’re willing to pay and try to do some negotiating yourself.
- Negotiate a Discount – After you’ve done some research and gathered knowledge of negotiated prices, you can try to talk your provider into giving you a discount before treatment. If you have a good relationship with your current provider, they may be open to negotiating the cost of care to help you out.
- Consider Outpatient Procedures – Hospital stays can be pricey, and often make up a significant portion of your medical bill. If you are having a mild surgery and you’re looking to save some money, ask your doctor if the procedure you need can be done in an outpatient center.
- Avoid Credit Cards – Using a credit card instead of a cash payment may put you in a compromising position if you ask for a discount later. Since the hospital already has your money at this point, you may not be able to bargain.
- Ask About a Payment Plan – If you still find yourself with a large bill even after discounts, consider asking your medical provider if he or she can implement an interest-free payment plan. Make timely payments in full, and you may be able to negotiate a further discount down the road.
Bankruptcy can be a confusing and stressful process. When you decide to file for bankruptcy due to medical bills, it’s essential to have someone on your side that understands the law. A reputable bankruptcy attorney can protect your interests and give you the advice to navigate through the journey.
Orum Young has filed over 200,000 bankruptcies over their career – the most in Northeast Louisiana. Our expert attorneys can make your bankruptcy case go as smoothly as possible. We keep our clients informed and protected no matter what. Contact our office at (318) 450-3192 for a free case review today.