When You Have Excessive Medical Bills: The Bankruptcy Option
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Medical Debt Information: The Medical Bankruptcy Option

Medical bills can add insult to injury.

In general, if you can't pay your medical bills, you have the following options:

  • Pay in full right away for a discount
  • Negotiate with creditors
  • Pay off with credit cards (and deal with interest rates)
  • File medical bankruptcy

Let's take a look at how each of these works, and see if one might be a good fit for you.

Medical Bankruptcy

The plan: Filing for bankruptcy protection when debt becomes unmanageable. All of your medical bills, from all doctors, labs and hospitals, are considered unsecured debt. This debt may be completely eliminated or secured and reduced when you file for bankruptcy. Bankruptcy will also offer protection against wage garnishment, lawsuits and creditor harassment.

If you file a Chapter 7 bankruptcy, your medical debt, along with any credit card debt and personal loans, may be entirely wiped out. This will allow you to get a fresh financial start so you can make a full financial recovery.

If you file a Chapter 13 bankruptcy, your medical bills will likely be combined, ordered and most likely reduced along with your credit card debt, mortgage and car payments.

Bankruptcy's automatic court-ordered stay will likely protect you against foreclosure, wage garnishment, repossession, lawsuits and creditor harassment while you make one monthly payment to a bankruptcy trustee. This trustee will handle all of your debts and creditors over the course of your court-approved repayment plan.

The problem: You must meet the eligibility requirements to file for bankruptcy and if you have previously filed bankruptcy in the last 10 years then you may not be eligible file again.

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Pay Your Medical Bills in Full, Right Away

The plan: In 2007, hospitals lost more than $34 billion in unpaid for health care. So if you offer to pay all of your bill right away, your doctor may give you a significant discount.

The problem: In order to receive a discount, you'll likely need to pay your bill in full. And this means having the cash on hand to make that payment. Even with a 30 percent discount, a $10,000 bill would still require you to pay $7,000 - right now, out of pocket. Also, this plan will only apply to a single provider. For example, if you received check-ups through one doctor, and surgery at a hospital and prescription drugs from a pharmacy, you might have to go through this process three times - and make three up-front payments.

Also, this plan likely won't help if you already received, and maybe even paid part of, your medical bills.

Negotiate With Creditors

The plan: Hospitals and doctors negotiate all the time, but it's usually with insurance companies. If you know you will have difficulty paying for a procedure you could try negotiating with your doctor and simply ask for a lower price. Who knows, they may give you a discount.

The problem: Then again, they might not. Also, your medical treatment may be divided up among several different groups. You may have a doctor that oversees treatment, a surgeon that performs work, a lab that runs test, a therapist that does recovery work and a pharmacist that provides medicine. To reduce your medical bills, you may need to negotiate with each of these groups separately. That's a lot of work to do when you should be focusing on recovery.

Pay Off Medical Bills With Credit Cards

The plan: Pay off your medical bills with your credit cards. This way, you can get one monkey off your back and have to worry about one fewer bill arriving each month.

The problem: This plan backfires almost immediately. Because of credit card interest rates, your $10,000 medical bill can quickly grow to unmanageable levels. With a 10 percent interest rate, fairly low for most credit cards, your $10,000 medical bill would become $11,000 overnight. And, if you're only making the minimum payment, you will be stuck with the bill for years to come.

What's more, if you miss a payment or go over your limit, you could be stuck with additional fees and a higher interest rate. All of this will continue to make your medical debt grow until it's out of control. And credit card companies may be less willing to negotiate or forgive a missed payment should you run into trouble down the line.

The bottom line: Don't use your credit cards to pay off your medical bills. It will likely only make the problem worse.

Medical Bills May Be Eliminated With Bankruptcy

Now that you know your options for medical bill assistance, you can make a decision about which option might be best for you. For more people than you might think, bankruptcy is a safe, legally protected way to get rid of their medical bills.

If bankruptcy is the right course for you, know that you aren't alone. More than 500,000 people filed bankruptcy in 2008 because of medical bills. These people needed serious relief from the financial pain caused by uncontrollable medical bills.

If you want to learn more about how bankruptcy can eliminate your medical bills, speak with a local bankruptcy lawyer. Your attorney can walk you through the process, explain how everything works and answer any questions you have.

To speak with a bankruptcy lawyer near you, complete the free form on this page and we'll connect you right away.

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The above summary of medical bankruptcy is by no means all-inclusive and is not legal advice. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.

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