Medical bankruptcy is the filing of bankruptcy to wipe out overwhelming medical bills, reports Nolo. Despite the Affordable Care Act, medical bankruptcy continues to be the leading cause of bankruptcy filings as of 2014, according to Fox Business.
Bankruptcy is often used as a way to discharge medical debt because courts consider medical bills unsecured non-priority debt, states Nolo. Unsecured means that it is not tied to property as collateral, and non-priority means that it is among the last bills to get paid in a bankruptcy proceeding. Most people who file for medical bankruptcy have insurance, but copayments, deductibles, uncovered services and other gaps in coverage cause huge medical bills to accumulate, as reported by CNN.
Although either chapter 7 or chapter 13 bankruptcy can eliminate medical debt, it creates credit score difficulties, and other options for medical bill payment should be considered first, according to Nolo. One possibility is to approach the medical provider directly and negotiate a partial waiver of the bill, and another option is to apply for a discount or waiver of fee under the Hospital Care Assurance Program. Medical billing professionals are available to help negotiate lower rates on medical bills, as reported by U.S. News & World Report Money.