According to data reported by CNBC, medical bills are the most common reason that Americans file for bankruptcy. If you’re struggling with doctor and hospital fees that you can’t afford to pay, this is what you need to know about medical bankruptcy.
Medical Debt By the Numbers
Unaffordable medical care is a widespread problem even for families who have health insurance. Consider these figures:
- The Consumer Financial Protection Bureau (CFPB) reported in 2014 that 43 million Americans have unpaid medical bills on their credit reports.
- These medical bills represent half of all unpaid debt in the United States.
- According to the CFPB report, the average American owes $573 in unpaid medical bills that have gone to collections.
- The 2017 American Household Credit Card Debt Study conducted by NerdWallet found that medical debt has increased by 43%, while household income has only increased by 20% over the past decade.
- In a 2016 Kaiser Family Foundation survey, 33% of Americans reported that they were unable to afford to pay their medical bills.
What Medical Debt Means for You
If you are worried about medical debt that you just can’t pay, know that you are not alone, and that there is a light at the end of this tunnel. Filing for bankruptcy is a viable option for many individuals who are overwhelmed with their health care bills, though it’s important to keep in mind that a bankruptcy will account for all outstanding debts you have — not just your medical bills.
When you file for bankruptcy, medical debts are considered unsecured debts. This means that like credit card debt and personal loans, these balances can be discharged if your bankruptcy is approved by the court. You will no longer be obligated to pay these bills and they will be removed from your credit report, although the bankruptcy filing itself will remain for up to seven years.
With Chapter 7 bankruptcy, all eligible debts are discharged. With Chapter 13 bankruptcy, some debts, including medical bills, are discharged, while others are reorganized in a repayment plan that lasts three to five years.
Some individuals may worry that if they discharge medical debt in bankruptcy, they can no longer visit that health care provider. This rarely occurs, however — especially when you seek care at a large health group. In fact, thanks to the Emergency Medical Treatment and Active Labor Act of 1986, federal law prevents hospitals from refusing necessary treatment to those who can’t pay for it. If you live in the Ventura County area and are considering bankruptcy, the team at Brent George Law can help you weigh your options to resolve your past-due doctor bills and other debts. Contact us today for your free consultation.