Can I File a “Medical Bankruptcy”?

You or a family member has been ill. Even if you have health insurance, co-pays and insurance company games may leave you with thousands, or tens of thousands of dollars in medical debt. And if you don’t have health insurance, a serious illness can be a financial nuclear bomb.

Can you file a “medical bankruptcy” just to deal with the medical debt?

The short answer is that you can’t just deal with the medical debt. The Bankruptcy Code doesn’t treat medical debt differently from credit card, car loan or mortgage debt. All debt is treated the same. There is no provision for a “medical bankruptcy.” But wait–this doesn’t mean that bankruptcy can’t still be a solution to a medical debt crisis.

Many people wrongly think that if they file for bankruptcy they will lose their home, their cars, and their household goods. This is untrue in the vast majority of cases. Every state allows people who file to “exempt,” or keep, certain items. In some states, any equity in your home us absolutely protected, as are cars, wedding rings, and a certain amount of cash. These exemptions vary tremendously from state to state, so be sure to check with a local bankruptcy attorney to find out if any of your assets are at risk. And if there is no equity in your home or car, in almost all cases, they won’t be affected by a bankruptcy filing.

So although there is no “medical bankruptcy,” bankruptcy to deal with large medical bills you simply can’t pay is certainly one option that may let you get out from under the weight of these necessary but unexpected bills.