Some reports suggest that approximately 62% of bankruptcies are a result of medical bills and illnesses resulting in a loss of income. Many of these filers had health insurance. They assumed they would be covered in the event of an illness or accident.
Not Covered by Insurance
Several things can result in unmanageable medical debt, pre-existing illnesses or illnesses not covered by insurance, gaps in coverage and out of pocket expenses related to the illness. In some states, you may also be responsible for your spouse or ex-spouse medical debt.
It may take years for an insurance company to settle on the case after a serious car accident. In the meantime, you may have lost wages and unpaid medical bills while you wait for a check to cover your costs.
Often Workers Compensation Insurance is not enough to cover your expenses, and you quickly fall behind on your bills, especially if your illness or injury prevents you from going back to work in a timely manner to catch up on expenses.
It is common practice for debt collectors to ask you to borrow money from family or friends, to use the equity in your home to get a loan or cash in your retirement plans to pay your medical debt.
Medical Bills Discharged in Bankruptcy
Medical bills, judgments from medical providers and other unsecured debts are dischargeable in Chapter 7 bankruptcy. The creditors and collection agencies will automatically be legally obligated to stop calling and moving forward on lawsuits or garnishments against you.
When you file Chapter 13 bankruptcy, you will work out a court-approved plan to pay out your medical and other bills over a three to five year period. As long as you make the required monthly payments, the creditors will not be able to contact you, and at the end of your bankruptcy any remaining debt will be discharged or eliminated.
If you have medically-related debt and are struggling to pay your bills, before you take out loans, use your home equity or cash in your 401 (k)s to make the payments, consider talking to a Columbus bankruptcy attorney to find out what other options you have to eliminate your debt and get a fresh financial start.