Medical Bankruptcy

Medical Bankruptcy Explained?
1.    Medical bankruptcy is a form of relief offered by a local government to provide aid (in the form of a restructured payment plan) to an individual stricken with debt as a result of costly medical bills.

2.    Medical services are attached with exorbitant costs; an individual (without medical insurance) is susceptible to incurring massive debts from receiving medical aid.
3.    Medical costs also include indirect costs; when an individual is sick or injured they are unable to work. The lost wages incurred represent negatively affect the individual’s debt to income ratio.
4.    Medical bankruptcy thus occurs when the cost of treating a medical condition exceeds the patient’s (or family of the patient’s) ability to pay for their medical treatment.
5.    As a result of the lost wages, opportunity costs, and high fees associated with medical treatment, even individuals with medical insurance commonly file for medical bankruptcy.
6.    Medical bankruptcy is available to those individuals who are considered a “medically distressed” debtor--an individual is classified as a “medically distressed” debtor if at least 25 percent of their annual income is paid for medical bills or related expenses--this classification will also apply to any individual who has obtained the mandatory 25% though lost wages.
7.    According to the United States’ Bankruptcy Code, there is no formal distinction between medical debts and other forms of debt, such as mortgage or credit card debt.

Medical Bankruptcy Procedure
1.    Individuals who file for bankruptcy as a result of medical costs may choose between a Chapter 7or Chapter 13 program.
2.    In a Chapter 7 Medical Bankruptcy policy, the majority of debt is forgiven; however, the filing will negatively affect the individual’s credit rating for 10 years.
3.    In addition to the negative credit rating, all nonexempt assets, will be liquidated by a trustee and distributed to the underlying creditors.
4.    A chapter 13 bankruptcy policy, in contrast, is considered less drastic. The Chapter 13 Bankruptcy policy enables the individual to work with a bankruptcy court to structure a repayment plan. The repayment plan will enforce the individual in debt to pay off his or her debts through incremental payments over a period of three to five years.

How to File for Medical Bankruptcy
1.    To file for medical bankruptcy you must first develop a list of all creditors owed; in most cases the creditors are medical care providers as well as any creditor associated with the medical costs.
2.    The creditors listed must be included in the process of filing for medical bankruptcy. To initiate the process you must include the names of all your creditors (along with their addresses) as well as the account numbers associated with debts.
3.    Once this information has been obtained, you should organize your paycheck stubs or proofs of income.  Collect copies of all account statements associated with your debts from the various financial institutions.
4.    Following this retrieval process, you should decide which type of Medical Bankruptcy is most appropriate given the particular situation.
5.    Obtain all standardized forms needed to file for the form of Medical Bankruptcy chosen. In addition, you must obtain the matrix for your repayment schedule; place all information gathered from your creditors on the matrix. All forms can be obtained from your local bankruptcy court clerk’s office. Complete the forms and contact your local bankruptcy court to initiate the filing.