Medical Debt and Bankruptcy go hand in hand. Medical debt is one of the leading causes for bankruptcy filings. Even with reform and wider insurance coverage, medical debt and bankruptcy still highly intertwine.  Between co pays and deductibles we still find ourselves with medical expenses that are out of control. Often, people are financially stable until a traumatic medical event occurs.  Whether this be fighting a long-term disease or the medical expenses to a devastating accident, bankruptcy is many times the only option.

Understanding Medical Debt and Bankruptcy

While medical debt is a form of unsecured debt, it has different rules and factors.  Most unsecured debt is an active choice by the debtor.  This means you choose to buy something on credit.  In contrast, medical debt is often not a choice but a necessity.  Choosing to fight cancer, arthritis, or even have rehabilitative recovery from an accident is rarely a “choice”.  This means the medical bills will begin to accumulate.  Good insurance will cover some bills, but eventually many people find themselves paying more and more out of pocket.  Thus, bills add up and can lead to bankruptcy.

The Filing Process

Second, medical debt does not appear on a credit report.  So, when you are preparing a bankruptcy filing finding all of your medical debt can be difficult.  For instance, having tests run by several differing specialists or using multiple doctors tends to create multiple bills.  You must include each creditor and bill in your filing. Otherwise the debt does not discharge.  This means you will still be responsible to the creditor.  Seeing as medical bills are usually in the thousands, this could pose a major problem for you.

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Third, medical debt and bankruptcy filing may never have an exactly “right time”.  This is because many of the medical bills people incur are from routine procedures or medicines.  Thus, on-going payments that you cannot afford will still continue.  However, all of the debt you have before filing will be wiped clean.  Therefore, any medical expenses coming after you file you will still be responsible to pay.

Other Medical Debt and Bankruptcy Issues

It’s no surprise the medical debt, like other debt, sometimes passes to collection agencies.  Generally, collectors on medical debt are some of the most aggressive.  They will make repeat phone calls and demands.  Further, these collectors tend to garnish wages or bank accounts quicker than other collectors.