Medical Bankruptcy FAQ
Commonly Asked Questions about Medical Bankruptcy, Bills and Debt
Don't let your medical bills add insult to injury. Know your rights and options.
Q. Will my insurance cover all of my medical bills?
A. Probably not. Even if you have private medical insurance, there are often limits or restrictions to your coverage.In fact, almost 80 percent of people who file bankruptcy because of medical bills are insured.
There may also be complications with filing that could leave you stuck with the bill. For example, if your insurance company is slow in paying, then creditors could come after you and your credit score could take a hit.
Q. How much medical debt do you need before you can file bankruptcy?
A. You can file bankruptcy for almost any amount of debt if you are unable to pay. As of 2009, the average person with medical insurance who files medical bankruptcy owes more than $17,000 in medical bills. And that's with medical insurance!
For the uninsured, the average debt is about $27,000. If you suffer from neurological disorders then the average debt is more than $34,000.
Q. Do people really file bankruptcy because of medical bills?
A. Absolutely. About 60 percent of all bankruptcy filings are related to medical bills. The nature of illness and injury also means that all types of people seek the help of bankruptcy in dealing with their medical debt. Of all people filing for medical bankruptcy:
- 60 percent went to college
- 66 percent own their home
- 20 percent of families included a military veteran or active-duty solider*
Q. Can unpaid medical bills affect my credit score.
A. Yes. If your medical bills go unpaid your hospital or doctor's office could turn the bills over to a debt collection agency. This agency can file a report with the credit monitoring services and your credit score will take a hit. Collection agencies may begin calling your house or sending letters in efforts to collection.
Q. What if I pay off my medical bills with a credit card?
A. Because of credit card interest rates, fees and penalties, putting your medical bills on a credit card could cause the amount you owe to increase. So while you might get rid of your medical bill problem, you would now be faced with a larger total debt, only now it's on your credit cards.
Q. Can I negotiate with my doctor to reduce my medical bills?
A. Maybe. Some doctors and hospitals will offer to put you on payment plans or even reduce your bills. But if your bill has already gone into collection then it may be too late. Also, it will be up to you to negotiate and try to work out a deal. Some large hospitals or health care groups may not negotiate.
Q. How is medical debt classified?
A. Medical debt is considered unsecured debt, and, as such, may be included and eliminated in Chapter 7 bankruptcy. Credit card debt, personal loans and payday loans are also considered unsecured debt.
Q. Will bankruptcy cover my medical debt?
A. Yes, in almost every case. Medical bills can be included in a Chapter 7 or Chapter 13 bankruptcy and there are very high ceilings for the amount of total debt - of all types - that can be included in your filing. If you file, your medical debt will be addressed in some way: Either completely wiped-out or reduced and prioritized.
Q. What will happen after I file bankruptcy?
A. Your debt can be back under control. And whether it is completely wiped or placed into a more manageable bankruptcy trust, you will once again have financial control of your life. Many people speak of filing bankruptcy as an opportunity for a new, fresh start. Bankruptcy can allow you to start rebuilding your credit, put your past troubles behind you and get on with your life.
Get More Answers About Medical Debt relief From a Bankruptcy Lawyer
If you have more questions about how bankruptcy may clear your medical debt, speak with a local bankruptcy lawyer.
A bankruptcy lawyer can answer questions about how bankruptcy works to get rid of your debt from medical bills. You can also find out how filing bankruptcy might affect your other debts and the rest of your financial life.
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*Statistics from a Harvard University report on medical bankruptcy study.