What to Do When Medical Bills Overwhelm You

Medical bankruptcy may become the only option for a person, regardless of their current financial situation or what type of medical insurance they carry. The uninsured are at the greatest risk of falling into the deep pit of overwhelming medical debt. However, in this economy, with fewer employers offering comprehensive and major medical plans, the well insured are also vulnerable. This is because of something on their policies known as the deductible.

Everyone is vulnerable to catastrophe. When a person is admitted to the hospital for a critical illness or serious injury, initial treatment can cost in the hundreds of thousands of dollars, as in the case of a heart attack or multiple injuries. Long term treatments add to the cost and therapy even more. Medical bills totaling over one million dollars are not uncommon. Insurance will pay only the amount, less the deductible and the co-pay. So, for example, a $100,000.00 medical bill, assuming it is all initial treatment and care, is subject to 20 percent co-pay and a 10 percent deductible. That is approximately $30,000.00. Add to that therapy, corrective surgery, anesthesia and many other procedures and treatments all subject to the same deductions and you have a mountain of debt.

Bankruptcy, in the form of Chapter 7 or Chapter 13, is often an answer. Chapter 13 permits a person to keep any assets while paying off the debts in a three to five-year period. This may not be possible for debts of 50K or more unless the person can return to a high paying job. Chapter 7 removes the payment responsibility of the debtor and uses the sale of personal assets to pay off all or part of the debts. Chapter 7 is a good option in many cases. The filer keeps his home and car, furniture and clothes and can start over. A good bankruptcy attorney should be retained to navigate through the process and to protect you from creditors who refuse to play by the rules and continue to harass.

Will medical bankruptcy hurt your credit so badly that you will never be able to borrow money? Bankruptcy, although it is a mark on your credit that can last for ten years, is not the end of the world. Taking out a secured credit card with a bank or keeping one card current and out of the bankruptcy is a good way to start rebuilding your credit.