Understanding Medical Bankruptcy

Bankruptcy affects thousands of Americans every year. Bankruptcy can occur in many ways whether from improper management of finances, to life events that were too much to handle like medical expenses. In fact, according to debt.org, roughly $3.3 trillion was spent on healthcare in 2016. These funds can take a toll on someone’s budget, especially if they do not make a lot of money.

Understanding Medical Bankruptcy

There is no textbook definition for medical bankruptcy. However, it is commonly known as bankruptcy that stems from medical expenses. The bankruptcy can be from the debtor receiving too many bills or even the debtor’s lack of income due to the health condition (even if the bills were manageable). No one is “safe” from medical bankruptcy. Both insured and uninsured debtors can experience different kinds of hardships within the healthcare system.

The debtor is never required to disclose the reason to file for bankruptcy. All they need to provide is the proper documentation that is required by the state to file. This means it can be hard to get accurate numbers on who actually files for bankruptcy due to medical reasons. However, the trustee at the debtor’s meeting of creditors typically asks what caused the debtor to file for bankruptcy.

Luckily, this type of debt is dischargeable in both a chapter 7 bankruptcy and a chapter 13 repayment plan. This means that even if you do not qualify for a chapter 7 bankruptcy case, you can still file chapter 13. A chapter 7 case is when your income and expenses are calculated in order to determine if you can make payments on the debt. If you do not qualify for a chapter 7 then a chapter 13 is a repayment plan that sets your debt to be repaid over the span of three to five years.

You do not need to file for bankruptcy in order to get rid of your medical debt. There are other tactics that you can use like working with your medical creditor to manage your debt. Your creditor is likely to be very flexible when it comes to repayment so you can figure out a plan that works for your budget. Your creditor may be easier to talk to than you may realize. Stay respectful when trying to figure out a repayment plan that works without having to file for bankruptcy.


There are numerous reasons as to why a person may file for bankruptcy. Medical expenses are one cause that can lead someone to end up filing for this option. However, that may not need to be the case. If you are dealing with potential medical bankruptcy, then you should contact your creditor to see what options are available. They may be more flexible than you think and can work around your budget. If you are unable to work with your creditor then you may want to consider filing for bankruptcy. Take your time to thoroughly research so that you can make the best decision for your current situation.