When one cannot keep up with their medical bills, then they may decide to file for medical bankruptcy. It will proceed just as any bankruptcy would as there is no specific designation because of the culpability of medical bills. A Harvard study reports that 60% of individuals who file for bankruptcy cite medical bills as a factor. There are many things to consider when deciding that filing for medical bankruptcy is the choice for you.
Medical bills can be outrageous to the average person. They may go into the tens and even hundreds of thousands of dollars. People who are uninsured and then hit with a medical emergency may face more debt than they can ever hope to pay back. Also, a lot of people who file for medical bankruptcy have health insurance, but the limitations, co-payments, deductibles, and exclusions overwhelm their financial options. When someone is sure that no matter how much they scrimp and save that they will never be able to pay it off then they may consider whether it is an option. It may let them start over.
People will also file for medical bankruptcy to get relief from creditors. They may have many different creditors hounding them day and night. They may receive threatening phone calls or letters. People may start to sue them, and they may be afraid that they will lose even more if these suits are successful. Filing for medical bankruptcy can allow a person to get rid of all of their debts.
There are many different strategies that a person can try to avoid medical bankruptcy. They may try to consolidate their loans into one monthly payment with more favorable interest terms or a longer payment period. Not everyone qualifies for debt consolidation, however. Also, they may try to work with their creditors. Sometimes creditors of medical bills will write off part of the charges or work to help you pay it back. These should definitely be tried before deciding on medical bankruptcy. If someone has tried all of these different techniques but nothing is successful then they may file for medical bankruptcy.
A person should also consider the negative effects of a medical bankruptcy. As with any bankruptcy, it strikes a significant mar on your credit report. You may be unable to attain credit to purchase a home, car, furniture, jewelry, electronics, etc. You may have difficulty securing a credit card. If you do get loans, these may have much less favorable terms such as extremely high interest rates. Also you may not be able to file for bankruptcy again for years. If your medical bills continue, then you may get stuck with them.
Filing for medical bankruptcy is often considered a last resort, and people do unfortunately get to that point. The above factors can help them decide whether this is a good option for them.
Resources:
http://www.bcsalliance.com/y_debt_medical.html
http://www.bankruptcylawnetwork.com/2007/07/08/bankruptcy-basics-what-is-a-medical-bankruptcy/