Bankruptcy Basics: What Is A Medical Bankruptcy?

by Karen Oakes, Esq.

July 8, 2007

There is no such thing.

One of the many reasons a person might file bankruptcy is because of medical bills. Even a short stay in the hospital can generate bills in excess of $10,000 or even $100,000. Without insurance, a person simply cannot afford to get sick. With insurance, many people still cannot afford to get sick. Even if you don’t have much in the way of unreimbursed medical expenses, if there is a loss of time from work, the family budget is destroyed with the loss of income. Elizabeth Warren, a Harvard professor, wrote recently that a study had shown that medical costs were a major factor in bankruptcy filings in the United States.

Folks come into my office telling me that they want to file a “medical” bankruptcy and keep the rest of their debts. The United States Bankruptcy Code does not offer that kind of solution to folks’ problems. All debt must be listed and all creditors must receive notice. The immediate result is that when a credit card company receives notice of a bankruptcy filing, the company immediately cancels the card. Sometimes doctors will no longer allow the debtor to come to their office for medical services. Doctors can do that; but, under federal law, if a hospital receives federal funding, the hospital cannot refuse to see a patient because the patient has not paid a past due bill.

A chapter 13 bankruptcy does allow a person to pay part of their debts and this kind of bankruptcy often makes a person feel better about filing bankruptcy. You should talk to your attorney about what kinds of bills you have, list all your bills on the paperwork that will be provided to the bankruptcy court, and discuss the options that you may have with the attorney.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.

Last modified: January 23, 2010