How Excessive Medical Bills May Affect Bankruptcy Proceedings

Medical Bills and Bankruptcy

It is estimated that approximately 60 percent of all bankruptcies that are filed are due to excessive medical bills. Those filing bankruptcy due to these costs are not necessarily those who are poor or uninsured. In fact, of the people who file for medical bankruptcy, over 60 percent attended college, over 65 percent own a home, and roughly 20 percent include a family member who is either an active duty military member or a veteran.
Due to the many restrictions, deductibles, copayments, and limits on health insurance policies, medical bills can still oftentimes spiral out of control. So it may not be surprising that nearly 80 percent of those who file bankruptcy based on medical expenses are insured.
In any case, the coupling of out-of-control medical expenses along with mounting credit card debt and higher than expected mortgage payment adjustments, can lead one to an unmanageable amount of debt.
Those who file for bankruptcy can do so for nearly any amount of debt, provided that they are unable to pay it. In 2009, the average amount of medical debt owed by a bankruptcy filer who had medical insurance was approximately $17,000. For those without insurance coverage, the average was closer to $27,000.

How Bankruptcy Based on Medical Bills Works
When filing bankruptcy, your debts need to be classified as either secured or unsecured. Debts that are secured include your home or car – in other words, debts that are secured by a physical item that may serve as collateral for the debt that is owed.
Conversely, unsecured debt is that in which there is no physical collateral to back up the amount that is owed. For example, amounts owed for services such as home repairs or medical services as well as payday loans and personal loans are considered to be unsecured debt.
Because medical expenses are considered to be a type of unsecured debt, these debts will be eliminated through a Chapter 7 or a Chapter 13 bankruptcy filing.
One of the first steps in the process of deciding which chapter you should file under is to make a list of all of your creditors. This list should include the names of all creditors, in addition to their address, your account number with that creditor, and the amount that you owe them.
You will then need to decide, based upon your overall situation, whether Chapter 7 or Chapter 13 bankruptcy is the right choice for you. Keep in mind that there are pros and cons to each type. Making this decision may best be done via the advice of an attorney.

Where to Turn?
The filing of bankruptcy for medical debt can be an especially complex issue. Therefore, it is important to seek the services and advice of an attorney who specializes in the area of bankruptcy. Because bankruptcy laws are federal and state related, a lawyer in your state of residence will be best able to guide you on what options you have available, based on your specific situation. Our bankruptcy lawyers in the St. Louis and Metro East area have experience and offer a free consultation.