The Medical Bankruptcy Myth
Each year many Americans find themselves facing bankruptcy through no fault of their own. The American Journal of Medicine reported in 2009 that medical bills contributed to more that 60 percent of U.S. personal bankruptcies. A catastrophic medical condition can wipe out savings, assets, and even cause loss of income.
The study conducted by researchers from Harvard Law School, Harvard Medical School and Ohio University found that more than 75 percent of these bankrupt filers had some form of health insurance, two-thirds were homeowners, and three-fifths had gone to college. Many of the debtors were average middle-class families who saw their lives tossed upside-down after a serious illness.
“Our findings are frightening. Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy,” said lead author Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School.
While medical expenses can lead to bankruptcy, the federal law requires the debtor to include all debts in a bankruptcy case, including auto loans, mortgages, and credit cards. A “medical bankruptcy,” when the debtor only discharges medical debt, is a myth. The bankruptcy laws do not allow the debtor to pick and choose which debts are included and which are excluded. Debts are treated fairly and equally in bankruptcy, and the debt classes are structured to avoid preferential treatment of one creditor over another within the same class.
For example, a hospital and a credit card company are generally classified as unsecured creditors and will receive the same treatment during the bankruptcy. If there are no assets available to pay these debts, both debts are discharged at the end of the case. However, while a debt may be discharged and no longer legally enforceable, the debtor may always voluntarily repay the creditor.
If your family is faced with high medical expenses, consult with an experienced bankruptcy attorney and discover your options. The federal bankruptcy laws can discharge your medical bills and provide a fresh start on a better financial future.
Medical Treatment And Bankruptcy
It is no surprise that illness is a chief contributor to personal bankruptcy. In fact, a 2009 study released by Harvard researchers claims that 62% of all personal bankruptcies during 2007 were caused by health problems. Many individuals struggling with medical bills need relief, but worry about how a bankruptcy will affect their ability to receive medical care in the future.
Under the Emergency Medical Treatment and Active Labor Act hospitals and ambulance services are required to provide emergency healthcare to a person regardless of ability to pay. This federal law requires appropriate medical screening, necessary stabilization, and transfer to an appropriate facility for treatment of an emergency condition. In broad general terms, if you have an emergency medical condition, a hospital ER must treat you.
If you do not have an emergency medical condition, the hospital or doctor may refuse treatment to a bankruptcy debtor. It is unusual for a hospital to deny service after bankruptcy unless the patient demonstrates an inability to pay the new bill. If you have insurance or other form of guaranteed payment, the hospital will likely treat you.
Individual physicians are more likely to deny services if you have discharged their bill. Many bankruptcy debtors want to continue a relationship with their personal doctor, and consequently make payment arrangements after the bankruptcy has been filed. While the bankruptcy law requires the debtor to list every creditor, there is no prohibition against paying a debt after the bankruptcy. Paying the debt does not renew or create a new obligation and the doctor may not take action to collect a discharged debt (i.e. writing or calling to encourage payment).
If you need to include medical bills in your bankruptcy, but worry about receiving future medical care, consult with your bankruptcy attorney. In most cases there is no interruption in medical care or treatment. Know your legal rights and be informed of how your bankruptcy will affect your ability to receive medical care.