People can accrue medical debt for all kinds of reasons. Some people have medical emergencies when they don’t have any kind of health insurance. Others may have high deductibles or coinsurance rates that leave them with major financial responsibilities after treatment. Some people require out-of-network medical care when they are on vacation or a business trip.
Whatever the situation, medical debt can quickly snowball into an insurmountable financial obligation. People dealing with high levels of medical debt often struggle to establish workable payment arrangements. Particularly if they still have medical challenges, they may not have much income, which can make paying their debts difficult.
Medical creditors may sell debts to private companies or may even try to place liens against patients’ homes in an effort to force them to pay for their care. Filing for personal bankruptcy may be one of the most effective ways to address medical debt.
Medical debt is a common cause of bankruptcy
A surprising number of households in the United States have some degree of medical debt. For certain households, medical debt may push people into financial insolvency. As many as three-fifths of those filing for bankruptcy indicate that medical debts played a role in their decision to file.
Bankruptcy may be the best option available to those dealing with high levels of medical debt. There is no specific type of bankruptcy required to address medical debts. Both Chapter 7 and Chapter 13 bankruptcy can help people address medical debts.
Either form of bankruptcy provides an automatic stay on the day that an individual files. That stay prevents additional collection efforts until the courts resolve the bankruptcy case. In a Chapter 13 bankruptcy, medical debts may be part of the three- to five-year repayment plan. After making a series of structured payments, the filer can discharge the remaining balance they owe at the end of the process.
In a Chapter 7 bankruptcy, people exempt most or all of their property from liquidation and may be eligible to discharge unsecured debts within a matter of months. Both types of bankruptcy can protect people from liens and lawsuits. They can result in the discharge of medical debts so that those who have overcome illnesses and injuries can rebuild their lives without constant financial pressure.
Those struggling to cover their medical debts may want to consider a personal bankruptcy filing as a potential solution for their current hardship. Pursuing personal bankruptcy can help people prevent aggressive collection efforts and can eliminate some of the debts that make their budgets impossible to balance.