Medical debt is a massive problem in the United States. Even with medical insurance, someone’s savings and income can be wiped out with one bad accident or illness. Between high deductible plans, insurance companies denying payment for no apparent reason, and bloated billing practices, it’s not hard for one emergency to cost tens or hundreds of thousands of dollars.
That’s why bankruptcy is one option available to those with significant medical debt. If you’re considering this option and wondering if it’s a good fit for you, call Padgett & Robertson at 251-342-0264.
Medical Debt is a Common Reason for Bankruptcy
First, know that you should not be ashamed of filing bankruptcy due to medical debt. This is a very common problem, with one study estimating that nearly two-thirds of all bankruptcy filings are due to medical debt. The bankruptcy system exists to help consumers get out of insurmountable debt. However, before filing, there are some things to think about.
Consider if Payment Plans Are Available
If you’re concerned about protecting your credit score, you may want to find out if payment plans or debt relief programs are available to you through your care provider. Many hospitals have programs in place for individuals below set income levels to get all or part of their bills paid. If you are able to pay your bill over time, find out if your care provider has a payment plan. While some require the balance to be paid in six months, others have a more lenient five-year payment plan.
Prepare for Future Medical Emergencies
You’ll also want to think about whether or not you are likely to have similar medical problems pop up in the near future. You can only file bankruptcy every eight years, so if you expect to accrue more medical debt in the coming years, you may want to hold off.
You could end up with all of your current debt discharged, only to have more medical debt hit shortly after. In that case, you would be at the mercy of your lenders and debt collectors, who could secure a court judgment against you and seize your assets or income. However, if your medical emergency was a one-off and you don’t expect significant debt to build up in the coming years, bankruptcy may be an excellent way for you to get a fresh start.
Find Out if Collectors Can Collect from You
If you are judgment-proof, you may not have to pay anyway. Note, though, that this option will still likely damage your credit. Some people are permanently judgment-proof. This includes seniors with protected income and few to no assets. Otherwise, though, it’s likely that you will stop being judgment-proof at some point in the future. When that happens, lenders will be able to come after you for payment. In that case, it may be better to file for bankruptcy first and take the initial hit to your credit.
Discharging Other Debts
You may also want to take a look at your financial situation as a whole. If all you have is medical debt that you can get partially forgiven through a need-based aid program, you may choose to save your credit by paying the rest of your debt off over a period of time. If you also have credit cards, personal loans, and other types of debt that you are struggling to pay, bankruptcy may be the better choice for you.
Comparing Bankruptcy Options
You can get rid of medical debt through Chapter 7 or Chapter 13 bankruptcy. If you file Chapter 7 bankruptcy, your debt will be completely discharged. If you go with Chapter 13 bankruptcy, you will still make payments for three to five years. The options available to you depend largely on your income level and assets, so it’s important to meet with a bankruptcy attorney right away to find out what your options are.
Explore Your Options with Padgett & Robertson
Bankruptcy could give you a new lease on life. When you meet with our team, we’ll get an understanding of your financial situation and help you understand your options. Set up a time to talk with us now by calling us at 251-342-0264 or filling out our .