Unpaid medical bills add up fast, and there’s no bigger reminder of this than the current pandemic. Medical spending in the United States adds up to over $3 trillion per year, and some experts predict that will go over $6 trillion over the next seven years. Medical debt is one of the major reasons why people file for bankruptcy—health care costs are increasing, while insurance coverage (if you’re lucky enough to have it) doesn’t always cover the full cost. With people recovering from COVID-19 only to have million-dollar hospital bills, it’s easy to see why medical bankruptcy looks desirable.
Here’s what you need to know before filing for medical bankruptcy in The Woodlands, TX.
- There’s no specific kind of “medical bankruptcy”: Because medical bills are such a widespread issue, the term “medical bankruptcy” is often bandied about. However, there’s no such thing as medical bankruptcy. When filing for bankruptcy, you will usually have a choice between Chapter 7 and Chapter 13, based on your assets, income and ability to pay back the debt. However, this proceeding will affect all of your assets and dischargeable debts, not just your medical bills.
- You have a choice between Chapter 7 and 13: Most individuals and married couples file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 requires you to pass a “means test,” reflecting your inability to pay, and requires you to liquidate your assets to pay your creditors. Once this is done, your debts are discharged and you have a fresh start—minus the bankruptcy notation on your credit report. Chapter 13 bankruptcy, on the other hand, allows you to keep some or all of your assets, so long as you strictly adhere to a repayment plan. You’ll usually have three to five years to repay the debt—often at a lower total amount then you actually owe—at which point your debts are considered repaid and you’ll be able to start over. Which type of bankruptcy you choose depends on your individual financial circumstances, whether you have assets you need to keep and your ability to stick to a payment plan. Consult with an attorney before you decide which type of bankruptcy to file.
- You will often be able to continue seeing your doctor: Some clients are very concerned that filing for bankruptcy will prevent them from seeing their doctor, or that their doctors won’t get paid because they are unable to keep up with their debt. Given how difficult it can be to find a good doctor, especially if you have challenging medical issues, this is an understandable fear. It’s true that your doctor can refuse to treat you after you’ve had medical debt discharged, but that’s not likely to happen, so long as you pay the debt you’ve incurred going forward.
Deciding to file for bankruptcy is a big step, but it can also be quite freeing. If you need help discharging your medical debt through bankruptcy in The Woodlands, TX, James R. Jones, Attorney at Law is here to assist you. Reach out to us today to schedule a consultation.