Even people who have medical insurance can be financially devastated by medical bills. Many policies have high deductibles. Even if you are responsible for only 20% of your medical bills, a major hospital stay can put you tens of thousands of dollars in debt. This is especially true when medical bills are combined with a drop in income from being off work due to an accident or illness. Medical bills are the leading cause of bankruptcy in the United States.
After recovering from a major illness or accident, you should not have to deal with the unhealthy stress of worrying about bills. Bankruptcy is there to give people the feeling like they can be a productive part of the work force without having their earnings going to debt that can never be realistically paid off.
Medical bills are easy to wipe out in bankruptcy. They are classified as “general unsecured debt”, which are the lowest priority of debt in the bankruptcy system, like credit cards, pay day loans, car deficiencies and signature loans. Some people believe there is a special kind of “medical bankruptcy” but medical debt is dealt with in the same kinds of bankruptcy everybody files – almost always Chapter 7 or Chapter 13. You can not pick and choose which debt to include in a bankruptcy. You can not file bankruptcy only on medical debt.
Likewise, if you have a favorite doctor, you can not leave that doctor out of your bankruptcy. Once you get a discharge, there is nothing wrong with voluntarily repaying any creditors. You can run into problems favoring one creditor over others just before bankruptcy. It is very important to contact a bankruptcy attorney if you are tempted to do so. Most doctors or hospitals will continue to see you even if you discharge a debt to them. You may want to ask them to be sure. If you think you will have more major medical debt incurred in the future, you should wait to file bankruptcy. The bankruptcy discharge only covers debt that was incurred before you file your case.
If you have a lot of medical bills listed on a bankruptcy, the trustee in your case will investigate whether you are able to sue anyone for an injury, malpractice, etc. If that is the case, the potential recovery from a law suit is an asset in your case whether you have filed a law suit or not. The trustee can hire an attorney and sue for you. If you think you can recover money from someone in a law suit, you should talk to your bankruptcy attorney about it. If you have hired a lawyer for a law suit, you should also talk to that attorney if you plan on filing bankruptcy. Much of your recovery can be exempted or protected in a bankruptcy but you can lose your exemption if you do not list and asset and claim the exemption. Failing to list assets intentionally can even expose you to criminal liability.