Most people are surprised to find that the estimated $1.5 million in bankruptcy filed this year, 62% of which will be a direct result of medical problems. Even more surprising is that more than 80% of those who apply for medical bankruptcy actually have health insurance. After that, they managed to take care of nearly $18,000 in medical debt! This is only $9,000 less than the amount owed by an individual who filed for bankruptcy due to medical reasons for lack of medical insurance.
Although $18,000 seems to be a small amount of debt that led to bankruptcy, part of the problem is the aggressiveness of the medical debt collection industry. When you default on credit card debt, the possibility of being sued is actually quite embarrassing. More likely, the seller will work with you to establish an acceptable payment plan.
In contrast, medical debt collectors seem to prefer litigation. They often file lawsuits in small claims courts, the amount of litigation is small, and most other lenders don't even bother. Since most people are not recognized for litigation, it is not surprising that many people panic and resort to bankruptcy protection.
What is medical bankruptcy?
Technically, there is no such thing as "medical" bankruptcy. The only personal bankruptcy is Chapter 7 bankruptcy and Chapter 13 bankruptcy. There is no difference in the reasons for bankruptcy.
However, in general, bankruptcy classified as medical is any bankruptcy filed for medical reasons. This may be due to excessive medical expenses or loss of income due to illness. In some cases, even individuals get a second mortgage to pay for their expenses. If the medical problem is the direct cause of bankruptcy, it can be called medical bankruptcy.
Medical Bankruptcy Equity Act of 2008
A bill filed in Congress in 2008 will provide a legal distinction for medical bankruptcy if passed. The bill will provide a home equity of $250,000 for those who file for bankruptcy for medical reasons. It will also eliminate the economic situation survey of those who filed for bankruptcy due to medical conditions. This means that many people with medical debt are now forced to enter Chapter 13. They can apply for Chapter 7. The bill also provides some relief for caregivers of critically ill patients.
Orignal From: Understanding medical bankruptcy
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