Medical Bankruptcy

 Health problems often lead to financial problems, and most of us have friends or  relatives who lost everything when they became ill. Besides the doctor and hospital bills a number of other costs can accompany illness, such as lost income when one is unable to work, and the exorbitant premiums insurance companies will charge for health coverage after an individual becomes sick. Studies indicate that over half of all individual bankruptcy filings in the United States are the result of medical setbacks, and everyone, who listened to the Health Care Reform debates earlier this year is aware that the routine acceptance in this country of individuals falling into poverty when they become ill has become a national scandal.


People who find themselves falling into debt as a result of illness often say they want to file “medical bankruptcy” with the general idea that the procedure will free them of various doctor and hospital charges, which they do not have the income to pay, and it is not surprising that the term medical bankruptcy has come into everyday use.



However, as a bankruptcy lawyer will tell you the bankruptcy code does not contain the term “medical bankruptcy,” and people who are filing bankruptcy because of illness face the same rules as everyone else. This includes the requirement that they participate in credit counseling programs designed to help people who have trouble keeping track of their credit card debt, and to me it seems rather insulting to subject a person who has just gone through a $40,000.00 operation to lectures that imply, that if she had just been a little more careful with her charge cards all her problems would evaporate with the dew as soon as the sun comes out.



There is some movement in Congress to change this, but it does not appear to be moving very quickly. The Medical Bankruptcy Fairness Act was introduced on February 4, 2009.  However, nineteen months later the bill does not look like it will become law anytime soon. The Act would provide such relief as allowing an individual filing medical bankruptcy to keep a  home worth up to $250,000 rather than having the home taken away to pay his medical bills.

The proposal would also remove the requirement for many bankruptcy filers that they file a Chapter 13 bankruptcy, which will require him to commit his entire disposable income for a five year period toward paying his medical debt before he can receive a discharge.