Medical care in this country cost $3.6 trillion in 2018 with an average per person cost of $11,172. At least 26 percent and up to 62.1 percent of bankruptcies involved medical-related debt and this problem may have grown over the last few months. While bankruptcy may provide a fresh financial start after you faced insurmountable medical debt, there are a few things you should know before filing.
Bankruptcy not restricted to medical debt
There is no specific bankruptcy applying only to medical debt. Even though medical debt may have caused bankruptcy, the case is not limited to resolving medical expenses. Medical debt is treated the same as credit card debt, personal loans, and utility bills. Bankruptcy is intended to discharge medical expenses and other debt.
A debtor must list all their debts, personal property and real estate when filing for bankruptcy. Family income and every family expense should also be disclosed even if the debtor’s spouse is not filing. Information on marital status, recent debt payments, and recent sales or transfer of property must be submitted.
Bankruptcies usually stay on a credit record, which may impact other loan eligibility, from seven to 10 years. To deal with medical debt, most people file for a Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 is a straight bankruptcy which, if successful, discharges or forgives debts. The process usually takes four to six months.
Recent income taxes and past-due child and spousal support, however, may not be discharged. Student loans are dischargeable under limited circumstances. Consumers must make loans payments after bankruptcy for secured debt such as cars loans and mortgages to keep those assets.
Georgia law exempts some property. Any nonexempt property must be turned over to a trustee appointed by the bankruptcy court. The trustee will sell nonexempt and turn over the proceeds to the debtor’s creditors. Giving up all property occurs only in less than five percent of Chapter 7 cases.
Changes to the law made 15 years ago made Chapter 7 eligibility more stringent. A means test applies to family income and expenses. Debtors qualify if their income minus reasonable and necessary expenses are less than Georgia’s median income. If this is higher, the debtor may consider filing a Chapter 13 bankruptcy.
This is a repayment or wage earner’s plan that lasts three to five years. It has advantages for certain debtors.
Payment amounts are based upon current debts and disposable income. This could reduce payments by thousands of dollars from the amount owed and lead to a discharge. However, a debtor may have to live on less monthly income because disposable income is used to pay off debts.
Chapters 7 and 13 require credit counseling with an approved agency before and after filing. Pre-filing counseling concerns whether bankruptcy is needed. Counseling after filing is intended to help manage finances.
Bankruptcy and medical care
The Emergency Medical Treatment and Active Labor Act of 1986 is a federal law that prevents hospitals from refusing to provide treatment to patients who are unable to pay.
Medical providers, including your primary physician, may refuse to provide treatment after your debt is discharged in bankruptcy. Providers usually do not take this drastic action and will continue to treat you if you are willing to pay bills going forward. If a provider is unwilling to treat you, you may find another health care practitioner.
A bankruptcy attorney may provide options that help you deal with medical and other debt. If bankruptcy is a practical option, the attorney can help protect your rights and assist you with filing.