02 Apr What is a Medical Bankruptcy?
Medical bankruptcy is a made up term. It is often used by non-lawyers to describe the primary reasons behind their financial downfall. It is a very real situation but not recognized as a special category of insolvency by the legal system.
It is hard to separate medical bankruptcies from general consumer bankruptcy cases. Financial stress caused by the costs of medical care for an individual or family member is often a contributing cause for a bankruptcy filing.
Medical service providers are aggressive about collection their debts and will take credit card payments, help arrange loans through specialized lenders such as Care Credit, a company with its own mobile app and credit card that specializes in “convenient health care financing”. When expensive medical treatments are involved, and insurance coverage is absent or inadequate, financial counselors at hospitals and other medical services providers will suggest a home equity line of credit or other ways to borrow money in order to prepare for payment of the anticipated medical bill. When the services have already been provided and payment is not forthcoming, most medical service providers are aggressive about pursuing legal avenues of collection.
Because many expensive procedures are prepaid, or when they are not prepaid they are quickly collected by the service providers, medical bills often do not show up in the list of creditors filed with bankruptcy schedules when the debtor ultimately resorts to Bankruptcy Court relief.
Most people work hard to pay their bills. Bankruptcy is not the first option for most debtors, it is often the last resort when all other options have failed. Consumers will advance on their credit cards, borrow against their homes, borrow money from friends and family, and sell personal possessions before they resort to bankruptcy in order to settle their debts.
As a bankruptcy lawyer, I meet directly with clients and collect the information necessary to file their bankruptcy case. My clients are often ashamed that they have been forced to resort to bankruptcy but often have no other option. They are quick to tell me about the economic forces that compel them into this action. In a large number of cases, it was an accident or illness, and the subsequent medical bills that caused the breakdown of family financial affairs.
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