Medical Bankruptcy is Common

It is no secret than many Americans are one tragedy away from financial hardship in the form of accidents, the loss of a job, a divorce, or an unexpected illness.  More than half of all bankruptcies are reportedly the result of overwhelming medical expenses.

Even (relatively) small medical bills can become overwhelming quickly because the health industry is rarely flexible in assisting the debtor in repayment.  Is bankruptcy the solution?

In Chapter 7 bankruptcy, you can discharge all unsecured debts, including your medical bills.  Even more important for many people is the fact that the automatic stay of bankruptcy would result in a halt in collection practices.  An individual should think carefully, however, before filing bankruptcy as a result of medical bills.  If there is a likelihood of additional medical bills down the road, the one time fresh start of a Chapter 7 proceeding may not be worth the years of poor credit.  A debtor who files Chapter 7 must wait years before filing again.  Further, the debtor may not qualify to file Chapter 7 if he makes too much money, and there is a legitimate reason to be concerned if you have a lot of expensive assets that the trustee in bankruptcy can use to pay those bills.

Filing for Chapter 13, on the other hand, will ensure some of your bills are paid, but at a rate that is manageable for you.  Many medical debtors simply seek a more flexible plan.  In addition, after the plan is completed, the court will discharge any remaining obligation.  The court will also assist you in forming a budget that may help you in the long run.

For many people, the rising cost of medical bills is overwhelming and often unexpected.  Further, such expenses often coincide with an inability to work or emotional distress.  It is important to remember that every situation is different.  If you experience the sudden and overwhelming experience of medical debt, you should consult a bankruptcy attorney who can help you decide what is best for you.

Stephen M. Trezza, Tucson Bankruptcy Attorney.