Destination The Pacific

Persons aged 65 and older represent a large percentage of the people filing for bankruptcy protection because of medical debt. Because the medical problems of the elderly are usually more frequent and more expensive than those of younger patients, and because their income is often limited, it's no surprise that older Americans are finding themselves increasingly financially pressured by medical debt. Another demographic group that appears to be more susceptible than average to filing medical debt-related bankruptcies

There are a variety of public policy problems contributing to the rise on medical bankruptcies. Health care costs have been rising exponentially over the past three decades, making it more likely that patients will have to go into debt to pay for medical care. While many people have health insurance, there are limits to what the insurance companies will contribute to medical costs. Even though this often covers about 80 percent of the bill, patients are still oftentimes left with medical expenses that they are unable to tell.

The health care industry has been especially aggressive in collections actions, often hiring very aggressive third party debt collectors to harass debtors and threaten them with lawsuits. This behavior has also contributed to the rising instances of medical bankruptcy, as the industry's perceived unwillingness to work with debtors has pushed many to file for bankruptcy.

The amount of medical debt carried by folks who file for bankruptcy protection is usually small compared to debts carried by other people who file for bankruptcy. According to a recent study, about 20 percent of bankruptcy filings involve medical debts of less than $1,000, just under half involve medical debts of less than $5,000 and a little more than 10 percent of bankruptcy filings involve medical debts exceeding $10,000. The relative insolvency of people likely to carry medical debts (single moms and the elderly) and the tough-nosed approach of the industry regarding debt seems to be pushing people who might otherwise be able to pay a reduced settlement into bankruptcy.

You should consider filing bankruptcy for medical bills if the health care provider is suing you and you have no other recourse to repay your debts. If you're considering filing a bankruptcy to discharge your medical debts, you should be aware of the options available to you.

Filing a Chapter 7 bankruptcy will result in a liquidation of your non-exempt goods to repay your debts. In most Chapter 7 cases, very little of your personal property will be non-exempt, meaning that you'll be able to keep your house, car and other possessions. Recent changes to the federal bankruptcy laws apply a means test to Chapter 7 bankruptcies, which in general mean that if after certain allowable deductions and exemptions for living expenses, you have a disposable income of more than $185.50 per month, you won't be eligible to file for Chapter 7 bankruptcy protection.

For folks not eligible for Chapter 7 bankruptcy, a Chapter 13 bankruptcy may be more appropriate. Chapter 13 bankruptcy requires filers to pay some or all of their debt back over a five year period. At the end of the period, any remaining debt is discharged. Chapter 13 may be preferable to Chapter 7 if you have property that is not exempt from liquidation under a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, because you're making payments on the debt, none of your property is liquidated.

Bankruptcy is a serious matter, and is not to be undertaken lightly, but in cases where you have no other recourse but to seek bankruptcy protection to stave off lawsuits or discharge otherwise unpayable debts, it can help you wipe the financial slate clean and allow you to get on with your life and spend more of your energy recovering from an illness or helping a loved one recover from an illness.