Medical Debt

Medical debt is an unfortunate reality for many people in the United States. In many cases, this type of debt arises out of a health emergency such as an unexpected catastrophic illness or injury. With the high cost of medical services, hospital stays, rehabilitation and other related needs, you can quickly find yourself swimming in debt. All too often insurance coverage is limited or unavailable. 

Even with the best of intentions, paying off such debt may be impossible. Bankruptcy can be the best solution if you are struggling with medical debt. At Kain and Henehan, we are very familiar with this kind of situation and want to work with you to see if bankruptcy is a viable solution. We are caring and compassionate right from the very first conversation.

What is Medical Debt?

Medical debt is a type of unsecured debt meaning that it is a type of debt that has not been secured by collateral, such as a home or car. Medical debt can be in the form of unpaid medical bills, invoices, and credit card debt. It is debt accumulated as a result of treatment for a health condition or an injury.

Medical debt includes expenses for doctor visits, surgeries, hospital stays, medications, physical therapy, and any other medical-related costs. If you have health insurance, it also includes any insurance co-payments or deductibles that you may owe and any other uncovered expenses.  

For example many forms of cancer require medication, chemotherapy, radiation treatments, hospital stays, multiple visits with specialists and oncologists, and surgeries. Treating a major illness like this can create a mountain of bills very quickly.

Secured vs. Unsecured Debt

Secured debt is debt that is attached to something of value, such as a car loan or mortgage. The collateral, meaning the house or car, can be taken back if you fail to make expected payments.  

Unsecured debt like credit cards or medical bills do not have any connection to property, and the creditors risk losing all their returns if the debtor becomes insolvent. Because of this, unsecured debt is usually more expensive, carrying large interest rates. 

Is Medical Debt Dischargeable in Bankruptcy?

Medical debt is one of the many types of debt that is dischargeable through personal bankruptcy. Medical debt can be discharged through both Chapter 7 and Chapter 13 bankruptcies.

In Chapter 7 bankruptcy, the debtor must pass a means test to qualify for a discharge of medical debt. This means that their income must fall below a certain amount.

In Chapter 13 bankruptcy, the debtor’s repayment plan must include paying off the medical debt over time. However, after the repayment plan is completed, any remaining balance on the medical debt will be discharged. This means that, depending on the type and amount of debt you have accumulated, it may be possible to have some or all of your medical debt eliminated during the bankruptcy process.

To determine which type may be best suited for you, it is highly recommended that you consult with a reputable and experienced bankruptcy attorney like Margaret Henehan or Bill Kain.

Eliminating Medical Debt

Bankruptcy is not usually a person’s first option when faced with medical bills. They do explore ways to try meeting their medical obligations. For instance they may negotiate with the medical provider to reduce or discount what’s owed. They may work with a facility or hospital’s billing  department to make a payment plan or suggest a lump sum payment in exchange for a reduction in the accumulated bill. If they have put the debt on credit cards, they may be able to negotiate with creditors directly, offering them a one-time payment in exchange for forgiving the remaining balance of medical debt. Some folks explore consumer credit counseling services to see if they can help clear the debt without having to declare bankruptcy.

However, these options may not be the best for you and your situation. The amount of debt may be so high that it is unrealistic that you can pay off the debt or creditors are unwilling to work with you.

Bankruptcy is a protection and a constitutional right that exists to help families like yours out of mounting medical debt.  According to the US. Courts, “Bankruptcy helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan.” Bankruptcy is a right in our U.S. legal system to help people, like you, get back on their feet financially.

How Many Bankruptcies are Due to Medical Debt?

In the United States, up to 43% of Americans are uninsured or underinsured. When faced with an unexpected injury or illness, uncovered medical expenses can add up quickly. Unfortunately many people find themselves unable to pay for all these expenses. Even with health insurance, medical debt can still accumulate due to high deductibles or copays and uncovered medicines and treatments.

Medical debt is one of the most common causes of personal bankruptcy.  In fact, some studies have shown that almost half of all bankruptcies are due to medical debt.

What Type of Personal Bankruptcy Should You Choose? 

Figuring out which type of personal bankruptcy may be best between Chapter 7 or Chapter 13 is ideally decided after consulting with one of Kain + Henehan’s bankruptcy attorneys. 

In general, Chapter 7 offers a way to eliminate medical debt without having to make payments, while Chapter 13 allows for repayment over a period of up to five years. But selecting one over the other actually depends on your financial goals, the type of debts, and other considerations to be discussed with your bankruptcy attorney.

Schedule a Consultation With a St. Cloud Bankruptcy Lawyer

At Kain + Henehan, we totally understand that medical debt is a very real concern. Too many families are facing this type of debt on top of dealing with the anxiety and worry over their own or a family member’s health crisis. We know this type of debt can be overwhelming, but with the right bankruptcy attorney you can find a way back to financial solvency.

Kain + Henehan are experienced bankruptcy lawyers with offices in St. Cloud, Minnesota and the Twin Cities area. We serve all Minnesotans and you can schedule a free 60 minute consultation virtually, by phone, or in person. 

Contact us by calling (612) 438-8006 or filling out the online form to learn more about bankruptcy protections for medical debt.