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Medical Bills and Bankruptcy

There are some common myths about medical bills and bankruptcy.  First, there is no such thing as a “medical bankruptcy.”  While medical bills are often the precipitating factor for while people file, a debtor must list ALL their debts when they file a bankruptcy, including those that they want to keep paying or some that aren’t dischargeable like child support or student loans.

For instance, many people have a mortgage and a car loan.  These are secured debts that must be listed, but typically people keep paying so they don’t lose the house or car.  But the Court wants to know how much equity you have in your assets (ie. the value over and above the amount of debt.) Every state has different exemptions for homestead and vehicles.  At your free consultation with our firm, we will explain what can and cannot be protected and what your options are to protect your assets.

Second myth, you cannot be held responsible for your spouse’s medical bills if you didn’t sign something at the hospital.  There is state common law that says a spouse can be sued for their spouse’s “necessities.” This started back in the day when women didn’t work, and a husband could be held accountable for things like food, clothing and medical bills.  Now it is a two-way street and typically seen for only medical bills.  Even if spouses are separated, until a divorce is final, medical providers can sue both for medical debt.

Third myth, you cannot be sued if the medical provider is accepting minimum payments.  Even if the bill is in collection and some third party is accepting monthly payments, don’t be surprised that after a year or so, you get a summons for a state court collection suit.  Unlike credit cards, hospitals and doctors cannot automatically charge interest on the debt.  But if they get a judgment, under state law they can get 9% interest.  Over time, this can add up.

This brings us to the last comment I want to make.  Medical providers are now suggesting people go to a finance company (like One Main or Carecredit) and get a loan to pay off the bill.  This gets the debt moved from the hospital’s past due accounts, but now people are facing even higher interest rates than 9%.  Before you sign up for one of these loans, check the interest rate.  Is it over 30%?  How long will it take to pay off the debt in full at the minimum payment they set up?  Does it really fit into your budget, or will you be “robbing Peter to pay Paul?”  Come see us for your free consultation and we can go over your budget.  There are IRS guidelines for things like food and clothing for a single person, married couple or family of four.  You might be surprised at what the average household is spending for things like this.

While no one aspires to file bankruptcy, you may need a fresh start if you have uninsured medical bills, especially if these amount to over $10,000.  Don’t struggle endlessly.  Call us for an appointment.

Nation Association of Consumer Bankruptcy Attorneys
The Missoui Bar
Illinois State Bar Association