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FAQ'S

Sunday, November 2nd, 2008

by Theodore Sliwinski, Esq.

Medical Bills and Bankruptcy

1. Are medical bills dischargeable in a bankruptcy?

Medical bills caused after a temporary illness, or medical debt that has skyrocketed because of a chronic medical problem(s) can force many New Jersey-ites to the brink of financial ruin. Many New Jersey-ites find themselves in massive debt because of a serious illness or from chronic health problems. If you or a loved one has suffered from a serious illness, which has left you with medical bills, doctor bills, hospital charges, or any other type of medical related debt, then you may have to consider filing for bankruptcy as an option. You may be able to completely eliminate your medical bills by listing them in a bankruptcy.

With the rising costs of health care and the high cost of medical insurance for employers, it can be very costly if you or a loved one becomes sick or suffers from a long term illness. If the illness is serious or causes you to become disabled, then this can only compound your dire financial condition. If you are forced to incur medical expenses and doctor bills that you can’t afford, and if you don’t have the income to pay for these debts, then ultimately this can force you to file for bankruptcy. Many hospitals, doctors, x-ray groups, and ambulance services send out their receivables to be collected by third party debt collectors, or to law firms to sue you. These debt collectors will call you five times a week. Moreover, these debt collectors will try to “drive you to drink” by stressing you out with endless phone calls and by sending you countless threatening letters. Meanwhile, the collection law firms will sue you, and once they obtain a judgment they will seek to garnish you for 10% of your paycheck, try to seize your bank accounts, and file a lien on your home.

The United States is a great country. However, our health care system is the “pits.” Most Americans pay 30% to 45% of their yearl income in taxes, and they can’t even have their Government provide health care services. In most of the countries in the European Union and in Canada, all of their citizens are provided with free health care. I don’t know why the United States does not provide health care to all of its citizens. In my opinion, our country is too obsessed with the military and in creating needless wars. Our country should be using more of its resources on creating a National Health Care System. A U.S. citizen should not have to file for bankruptcy if he gets sick, and it he is overwhelmed with outrageous medical bills.

I also believe that the state medical boards should be compelled to license more doctors. More medical schools should be built and more people should be trained to become doctors. In the past two generations the amount of lawyers has increased tremendously. Consequently, the overall price of legal services has decreased substantially because there are more practicing lawyers. I am certain that if the number of doctors increased, then the price of medical services would also be substantially reduced as well. Part of the health care crisis really boils down to a simple “supply and demand” analysis. If there are more practicing doctors in the United States, then the price that they charge would be reduced based on commonly accepted economic principles and doctrine.

2. Are medical bills dischargeable in a chapter 7 bankruptcy?

If you are swamped with astronomical medical bills, then filing for a chapter 7 can in many instances will allow you to completely eliminate them. If you are eligible to file for a chapter 7 then you can eliminate your medical bills, hospital charges, doctor bills, medical collections, dental bills, and almost all other medical related debt. Medical related debts are considered to unsecured debts, and they are treated in the bankruptcy process almost exactly like credit card debts. Thus, medical bills can be totally eliminated in a chapter 7 case.

3. How are medical bills treated in a chapter 13 bankruptcy?

If you are a debtor, and if you earn too much to file a chapter 7 case, and if a bankruptcy means test requires you to file for chapter 13, then you still may be able to eliminate a significant amount of your medical bills. A chapter 13 case is a court supervised a repayment plan. In a chapter 13 case a debtor is allowed to keep his most important property while he repays a percentage of his debts over time. If you file for chapter 13 then you may be able to significantly reduce your medical bills. In a chapter 13 you are only required to repay a percentage of your medical bills over a three to five-year period of time. The percentage of your medical bills that you will be required to repay will be based on your disposable income. In the majority of the cases a chapter 13 case forces unsecured creditors like medical debts, hospital bills, and doctors’ bills to accept pennies on the dollar.

4. What is a summary of a debtor’s ability to eliminate or reduce medical debt by filing for bankruptcy?

If your health or the health of your children or other loved ones is at stake, then you will spare no expense to get them or yourself back to good health. Moreover, should you or a loved one suffer a life-threatening health crisis, then you would advise the doctor or hospital staff to do anything at whatever the cost. Unfortunately, cost is an object in the United State’s health care system. Moreover, in many cases a family’s medical bills wind up being unpaid and then sent to collection. Medical bills go unpaid for many reasons such as; having no health insurance, having inadequate health insurance, or not being able to afford health insurance that may be available.

The United States remains far behind in offering medical coverage and health insurance for its citizens. It is common knowledge that health care costs are inflated and are out of control. Those in New Jersey who can’t afford health care must sometimes choose between their money and their life. It is important to emphasize that going without health insurance because of the cost entailed ends up costing much more when a serious illness occurs.

Fortunately, for many New Jersey-ites there is relief from overwhelming medical bills. The United States Bankruptcy Code provides an avenue for hard-working Americans to discharge medical bills that are impossible to be paid. In many of my cases, my clients amass medical debt that almost equals or exceeds the principle of an average home mortgage. There are millions of Americans who are forced to file for bankruptcy because of their financial problems caused by medical bills. If you have medical bills, doctor bills, hospital bills, medical collections and, ambulance bills, and if they are so large that it is impossible for you to ever pay them, then bankruptcy may be the answer to this problem.