What is a Medical Bankruptcy?

There are only two types of bankruptcies available for individual persons, a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. Medical bankruptcy is not a separate form of bankruptcy filing for individuals. Instead it is a way for people to explain why they have to file for bankruptcy. A medical bankruptcy occurs when a person or family or family member becomes so overwhelmed by a medical illness or emergency that they are unable to continue to pay their medical bills in addition to normal living expenses. For most people, a medical bankruptcy is unavoidable and not expected. Although the individual may have a specific budget that provides for regular and routine medical bills and normal living expenses, the unexpected medical emergency can destroy a person’s or family’s life savings as well as their budget and prevent them from ever recovering financially.

This is more common than many people think. The case of the person with no medical insurance is obvious, but it’s not just the uninsured who could be forced to file bankruptcy because of medical issues. Even though a person has medical insurance either through their place of employment or a spouse’s or their own separate private policy, many times medical insurance plans have limits as far as the type, extent, amount and limit of coverage available. For example, a person may have a medical insurance policy and pay a monthly premium each month and believe they are completely covered in case of an unexpected medical emergency or illness; however this is often times not the case. Many insurance plans provide for only 80% coverage of a person’s total medical bills. The individual is then left to pay the other 20% out of pocket. For example, this means that if a person’s heart surgery procedure costs $100,000 the insurance company will only cover $80,000 of it and the person is left to pay the remaining $20,000 which is often times out of the question and impossible to budget for.

Another example of how a medical bankruptcy can occur would be if there is a $1 Million dollar limit on total coverage. However for someone who has an ongoing medical condition that requires continued treatment, such as cancer, and the treatment required exceeds the $1 Million dollars (any often times does these days with the cost of doctors and hospitals skyrocketing) then the individual is left with the remaining medical bills to pay on their own. This can lead to astronomical medical costs which are nearly impossible for most people to ever pay in full.

As the cost of medical care and coverage continues to rise at an alarming rate, many more people in the future may have to experience a medical bankruptcy. This is evident by the high percentage of people who have already had to file because of medical bills, which some people believe is at least a contributing factor in at least 50% of all bankruptcy filings.

Bankruptcy can provide relief to people who are experiencing these types of issues. Bankruptcy can relieve a qualified person of these medical debts as well as any other debts they are able to file bankruptcy on. This can allow a person once they have filed for bankruptcy and received a discharge to get a fresh start and relief from these types of bills and burdens.

Read Bankruptcy articles