Medical bankruptcy may become the only option for a person, regardless of their current financial situation or the type of health insurance they have. People without insurance are at the greatest risk of falling into the deep well of overwhelming medical debt. However, in this economy, with fewer employers offering major and comprehensive health plans, the well-insured are also vulnerable. This is due to something in your policies known as a deductible.
Everyone is vulnerable to disaster. When a person is admitted to the hospital for a critical illness or serious injury, the initial treatment can cost millions of dollars, as in the case of a heart attack or multiple injuries. Long-term treatments increase the cost and therapy even more. Medical bills totaling more than a million dollars are not uncommon. The insurance will pay only the amount, minus the deductible and copay. So, for example, a medical bill of $100,000.00, assuming it is for initial care and treatment, is subject to a 20 percent copay and a 10 percent deductible. That is approximately $30,000.00. Add to that therapy, corrective surgery, anesthesia, and many other procedures and treatments, all subject to the same deductions, and you have a mountain of debt.
Bankruptcy, in the form of Chapter 7 or Chapter 13, is often an answer. Chapter 13 allows a person to keep any assets while paying off debts over three to five years. This may not be possible for debts of 50K or more unless the person is able to return to a good paying job. Chapter 7 eliminates the debtor’s responsibility to pay and uses the sale of personal property to pay all or part of the debts. Chapter 7 is a good option in many cases. The declarant keeps his house and car, furniture and clothes and can start over. A good bankruptcy attorney should be hired to navigate you through the process and to protect you from creditors who refuse to follow the rules and continue to harass you.
Will medical bankruptcy hurt your credit so much that you’ll never be able to borrow money? Bankruptcy, although it is a mark on your credit that can last ten years, is not the end of the world. Taking out a secured credit card with a bank or keeping a card in good standing and out of bankruptcy is a good way to start rebuilding your credit.