Unfortunately, in our present economic times, many people with medical insurance still incur large medical debt when an illness requires hospital care, or protracted medical treatment. Depending upon the medical diagnosis, certain strategic planning may be necessary in order to protect a person's or families' personal budget, and in order to qualify for important medical financial assistance programs.
Unfortunately, a recent article in Forbes told a story that is all too common for people who have gotten sick.
The choice of which bankruptcy chapter to file, and when is the correct time to file the bankruptcy case varies from case to case. Medical debt is dischargeable in bankruptcy in both Chapter 7 and Chapter 13 cases. The timing of when the medical debt was incurred, and what procedures were obtained should be considered. If you are thinking about filing bankruptcy for medical debt reasons, then the possibility of not filing bankruptcy, and seeing if other alternatives are available should usually be explored before a bankruptcy case is filed. Many hospitals have internal programs that will reduce the debt, and allow for a portion of the debt to be paid by the uninsured. Many health care providers will accept a stepped down, or compromised payment from the sum owed. Before filing for bankruptcy, these programs should be explored.
When no payments are made on medical debt, like other unpaid debt, the debt will be assigned to collection agencies or attorneys. Again, this debt can be settled or compromised without filing for bankruptcy. Usually, collection agencies will be reasonable with settlement offers if the person does indeed qualify for a bankruptcy filing. If a person finds themselves in this situation, then it is wise to consult with a bankruptcy professional, and perhaps have this person work on settling the debt. The debt can often be settled for 25 percent, based upon the face amount of the debt.
Bankruptcy should be considered if there is no way to make some sort of compromised payment to the creditors. However, it is wise to time the bankruptcy filing so that no new significant medical debt will be incurred after the bankruptcy case is filed.
See this article for more information on bankruptcy and medical debt.