Medical debt

Medical debt is an eerie specter, haunting the finances of even the well-healed. The phantom of medical debt often drags the finances of the less fortunate into the abyss.

If the red-inked chain around a debtor’s neck was forged from car loans or mortgages, most would exorcise the demon of debt with a legal incantation; that is to say, they would find an attorney to help them file bankruptcy. Far fewer realize that bankruptcy is also an option when facing unsurmountable medical debts.

Americans are Overburdened with Medical Debt

The United States is home to many of the greatest living medical talents. American research hospitals treat cancer and heart failure with advanced therapies bordering on science-fiction. American surgeons can reconstruct shattered limbs and repair or replace damaged organs with unsurpassed skill.

Yet this advanced medicine comes at a cost. Life-saving operations at world-renowned hospitals are rarely performed as acts of charity. Emergency departments in major American cities will save your life—and then send you the bill. Surgery alone can cost hundreds of thousands of dollars, and the accompanying hospital stay can double that. If you need exploratory surgery, it’s not uncommon to leave the hospital with bills totaling half a million dollars.

Even with the greatest insurance covering 100% of your stay, you will still have to deal with lost wages while you are in the hospital. With mid-range insurance, you could still end up owing thousands of dollars. And many cheaper plans have a small pool of approved care providers; get injured while on vacation in another state, and you could be charged exorbitantly for “out of network” services.

A few hours in the OR and a week in recovery costs more than most people’s homes are worth. That’s a terrifying prospect even with insurance; for the under- or uninsured, a sudden medical emergency means financial catastrophe. At a time when the average American can’t produce $500 in an emergency, what hope have they of escaping the ravishes of debt collectors, repossessions and wage garnishments?

Bankruptcy Can Protect You and Save You

Freeze Collections and Lawsuits with the Automatic Stay

One of the worst parts of owing money is the hounding of debt collectors who hound you, your employers and your family. Eventually, when harassment fails, collections agencies might turn to liens, wage garnishments, or attempt to freeze your accounts.

Thankfully, the collection agent’s quest to bleed a stone can be halted by filing bankruptcy. After you file bankruptcy, the automatic stay kicks in. The automatic stay is a powerful tool to ward off predatory debt collectors and protect your remaining assets. The automatic stay can slice through nearly any collections-related entanglement.

Is your car about to be repossessed? Your home slated for the Sheriff’s auction? Collectors calling night and day? Not anymore!

Once you have filed for bankruptcy protection and the automatic stay takes effect, you are shielded from collections. If creditors try to violate the automatic stay, they could face fines and damages. 

Discharge of Debt and the Fair Debt Collection Practices Act (FDCPA)

If your bankruptcy filing goes as planned, you will be discharged of your unsecured (medical) debt, meaning, you are no longer personally responsible for it.

Once you receive a discharge and your case closes, the automatic stay ends, but you will remain protected from unfair creditor harassment by the Fair Debt Collection Practices Act. Under the FDCPA, anyone who tries to collect on your discharged debts will be in violation of federal law. The lawyer who helped you file bankruptcy will be able to send cease and desist letters and litigate this for you if necessary - if a creditor violates the FDCPA they must pay a fine to you and your attorney fees!

Timing a Medical Bill Bankruptcy

Deciding when to file bankruptcy due to medical bills can be tricky. If you were facing other debts, the usual recommendation would be to file your bankruptcy as soon as practicable. Normally, you would want to file bankruptcy when wage garnishments and repossession are just threats. Filing bankruptcy freezes collections, but it generally doesn’t undo what has already been paid, seized, or repossessed.

Medical bills are a challenge. They are unpredictable; who knows when a doctor will order a new test or administer a new drug? Who can predict when an accident will occur and you are injured? Not only that, but the bills themselves are often tied up in billing departments and insurance company review for weeks or even months after the date of treatment.

Your bankruptcy can’t discharge future bills. So if you file bankruptcy today and a bill for your CT scan comes in two weeks after your discharge, you might be stuck with that bill and forced to make payments.

If you have a chronic condition, large hospital bills could come at any time. In this case, you need to weigh the debts you currently have against the possibility that you will be swamped with debt again in a few months.

If you have a major surgery pending, it might make sense to file after you’ve cleared recovery and received the most expensive treatments and therapy.

You don’t have to make these decisions alone. Any qualified bankruptcy attorney can help you. Call one for a free consultation.

Veronica Baxter is a writer, blogger and legal assistant operating out of the greater Philadelphia area