Some people fall behind financially because of predatory business practices. However, many people end up in debt because of medical issues. They have an emergency on vacation where they require out-of-network care at a foreign hospital. They require cancer treatment that is subject to a high coinsurance rate.
Those individuals may recognize that their medical debts are fully valid, but they may still struggle to make the necessary payments to keep their accounts in good standing. Sometimes, even those who aspire to repay their medical debts in full come to realize that filing for personal bankruptcy may be the only viable path forward once they have high levels of medical debt.
Why medical debt is unsustainable
Medical creditors are not as forgiving and patient as people might hope. Most hospitals and corporate medical practices have entire departments whose sole focus is extracting payments from those who have undergone treatment at the facility.
When patients fall even slightly behind on their payment arrangements, medical creditors may become quite aggressive or may sell those debts to third-party collection firms. Both situations can increase the financial stress on someone who may still be coping with the aftermath of a medical issue.
Those hospitals and collection agencies may decide to sue over medical debt. A successful lawsuit can result in wage garnishment or a lien against the patient’s primary residence. Both of those outcomes can worsen the financial stress for the former patient.
Unfortunately for those facing creditor lawsuits, the court system rarely takes into account why someone has fallen behind. All that matters is that the debt is valid and an individual is in arrears. The courts typically rule in favor of creditors even in scenarios where the person who owes money has clear documentation of personal hardships.
Those facing debt-related lawsuits often face an uphill battle if they want to avoid a judgment in court. Bankruptcy is often the simplest way to sidestep the potential of future financial hardship.
How bankruptcy helps
Provided that an individual files for personal bankruptcy before creditors secure judgments, they can avoid the worst-case scenario in a debt collection situation. The courts typically authorize an automatic stay when someone files for bankruptcy. That stay prevents collection activity, including debt-related lawsuits.
Typically, filing for bankruptcy means that the courts dismiss the pending lawsuit. If the bankruptcy filing is successful, the filer can eliminate their eligible medical debts. Most medical debts are unsecured and are eligible for discharge in both Chapter 7 and Chapter 13 bankruptcies.
Instead of dealing with constant financial stress and struggling to make payments, people who have recently overcome a medical challenge may benefit from filing for bankruptcy and obtaining a fresh start financially.