Medical debt is one of the leading causes of poverty and can cripple families financially. Outstanding medical expenses is also one of the reasons families file for bankruptcy.
If you are considering bankruptcy to get out of your medical debt, the following are some things you should know.
Is There a Bankruptcy Option Specifically for Medical Debt?
There is no specific type of bankruptcy filing for medical debt only. Bankruptcy is designed to help individuals revamp or discharge debts with the goal of positive financial standing. Medical debt is the same as any other debt, including personal loans, credit card debt, utility bills, and the like. Bankruptcy treats all of these debts in the same manner.
If your goal is to restructure or discharge your medical debt, you have to disclose all of your debts, income, property, real estate, and expenses. In addition, you have to disclose your recent debt payments, property purchases and transfers, and your marital status. When you file for bankruptcy to get relief from your medical debt, you can also eliminate other debts also.
Which Type of Bankruptcy Should You File for Your Medical Debt?
You can select between two different types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is a straightforward process with the goal of discharging as much of your debt as possible, including medical debt. You cannot discharge all debt, however. Student loans, child support payments in arrears, alimony, and recent income taxes cannot be discharged in Chapter 7 bankruptcy.
If you have a debt tied to property, like your home or a vehicle, and you want to keep the property, you can leave the debt out of the bankruptcy, but you will have to continue making payments to your creditors. This is called an exemption. Exemptions allow you to keep property based on its type and value.
Although Chapter 7 may sound like the right choice for your family, keep in mind that not everyone will qualify due to changes in federal laws. To be allowed a Chapter 7 bankruptcy, you have to meet certain criteria based on your expenses and income. If you cannot qualify for Chapter 7, you may qualify for Chapter 13 bankruptcy to deal with your medical debt.
Chapter 13 bankruptcy restructures your debts into more manageable payments that last over a certain period of time. Although this may not sound as attractive, Chapter 13 has some benefits.
Your final payment amount is paid through the court and is based on the amount of your debt and your income. If your disposable income is low, you may not have very large payments to make.
You may also be allowed to discharge the remainder of the debt that you cannot repay at the end of the repayment period. However, you will not have as much disposable income, which means you may have to amend your lifestyle throughout your bankruptcy repayment period.
Will Your Doctor Continue to See You?
One concern specifically regarding medical debt is whether or not your doctor will continue to see you as a patient. This depends on the nature of your medical debt. If you owe the money to a hospital, you can still seek treatment at the facility. Federal laws prevent hospitals from refusing to see any patient despite any debts owed.
However, if you owe the money directly to your doctor, such as a primary provider, they can choose to drop you as a patient once the debt goes into bankruptcy. This does not necessarily mean this will happen, but it is a strong possibility. If you have a good, long-standing relationship with your physician, they may choose to keep you as a patient. At the end of the day, you should prepare yourself and search for an alternative provider just in case.
If you have any questions about bankruptcy, please contact us at the Madden Law Firm Attorneys at Law.