According to a report published by CNBC, medical bills were cited as the single biggest reason for personal bankruptcy filings over the last 10 years. Some estimates say that as many as a million people seek bankruptcy protection because of medical obligations every year. So, if you have substantial medical bills that will take years to repay, should you try to discharge them in a Chapter 7 bankruptcy? That depends.

If you have good credit, but have a huge medical bill, it’s important to understand that filing for bankruptcy will have a negative impact on your credit. However, it’s also important to understand that, should you need to apply for credit in the next few years, the potential creditor will typically look at whether you’ve honored your other obligations, and will often take the unique circumstances into account when making the decision to extend credit.

Before you file bankruptcy, though, you may want to consider some of the following options:

• Negotiate a payoff with the hospital, doctor or medical services provider—It can often be in the medical provider’s best interests to take some kind of a settlement, rather than try to recover anything in a bankruptcy proceeding. Often, you can set up an installment arrangement and the hospital won’t make additional efforts to collect the debt as long as you stay current on your promised payments.
• See if you qualify for assistance under a government program—The Hospital Care Assurance Program (HCAP) offers income-based assistance to people who require hospital treatment. In addition, the Affordable Care Act requires that non-profit hospitals provide free or low-cost health care to low income patients in return for their tax-exempt status.

Ultimately though, you have to be practical and realistic. Whatever else, get early advice about the bankruptcy option. It may or may not be for you but do not discount it. And, as we have said in an earlier blog post, a recent study by the New York Federal Reserve Bank showed that for those who are dorwning in debt, a bankruptcy filing actually improved their credit score and access to credit 18 months later.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, weknow that the bankruptcy process can be intimidating and confusing. Weoffer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

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