A single trip to the emergency room can change your whole financial picture. That is why so many families lie awake worrying about medical bankruptcy and what one unexpected illness could do to their savings. If you live in Clearwater or anywhere in the Tampa Bay area, you are not alone in that fear. The good news is that medical debt has real solutions, and understanding your options is the first step toward feeling calm again.
The Growing Fear of Medical Bankruptcy in America
A Gallup survey found that about half of U.S. adults worry they could be pushed into medical bankruptcy after a serious health event. That was a 5% jump from the year before. Younger Americans between 18 and 29, along with non-white respondents, reported an even sharper rise in concern. Analysts were not shocked. The cost of medical care keeps climbing, and that steady increase makes people feel more exposed every year.
Why Medical Debt Is So Widespread
About one in seven households in America includes someone who is struggling with medical debt, according to a separate UPI survey. When including more distant relatives and friends, that number rises. And when you add in neighbors, coworkers, and other relatives living in other parts of town, the list of people who are struggling to pay a medical bill is likely to include almost everyone in the Tampa Bay area.
Long-term medical debt disproportionately affects low-income families. 28% of households earning less than $40,000 per year have medical debt, while 6% of households earning greater than $100,000 per year have medical debt. Because families living on the edge of poverty are living from paycheck to paycheck, one surgery, a brief hospital stay or a chronic condition can turn an otherwise manageable month into a year of harassment by a collection agency.
Most Americans Lack Emergency Resources
A related survey found that many Americans doubt their ability to handle a surprise medical bill. More than 25% of those polled said they would have to borrow from friends or family to pay a $500+ bill. Others said they would charge the bill to a credit card and then pay interest on it for months. That would add a lot of stress to an already difficult situation.
Insured Floridians would do well to save an emergency fund given that many insured individuals carry high deductible health plans with deductibles that can exceed $5,000. This requires the individual to have cash on hand to pay for their medical treatment until the insurance kicks in. Every bit of savings on a monthly basis will provide a critical buffer to protect against the possibility of unexpected illness or injury leading to debt.
How COVID-19 Made Medical Debt Worse
Healthcare costs were already rising fast when the COVID-19 pandemic added a new layer of worry. During the height of the outbreak, about 14% of Americans with virus symptoms said they avoided care because of the cost. More than 80% expressed concern about rising drug prices tied to the crisis. Lost work hours and reduced income made those bills even harder to face.
For many Florida households, the costs of a hospital stay and the use of a respirator are too expensive. Even with adequate health insurance, patients and their families often struggle to pay their hospital bills. In between doctor’s visits, patients worry about lost wages due to illness, unexpected medical charges, and instances in which their insurance does not cover needed care. When families are forced to make the difficult choice between paying for needed medical care and saving money in the short term to avoid debt, the consequences of not receiving care in the short term will ultimately result in greater health problems and increased health care costs in the long term.
There Is Nothing to Fear in Medical Bankruptcy
When medical bills grow beyond what you can pay, hospitals will often point you toward one clear path: filing for bankruptcy protection. A Chapter 7 case can wipe out qualifying medical debt entirely, giving you a true fresh start. Because medical bills count as unsecured debt, they are among the easiest balances to discharge.
There’s a time frame to consider when filing Chapter 7 bankruptcy. Chapter 7 can only be filed every eight years by an individual. Therefore, it would be wise to wait until the completion of your treatment. This way, all of your outstanding medical bills can be discharged in one shot as opposed to having new bills surface after your bankruptcy filing and not being covered by your discharge. Many who have in the past thought negatively of bankruptcy say that it was the point in time when they regained control of their life.
Rebuilding Credit After Medical Bankruptcy
It’s not easy to rebuild your credit after a bankruptcy, but it can be done. The impact of the bankruptcy will fade as the years go by and soon lenders will look at your recent payments. Even shortly after the bankruptcy has been closed, people who have filed often are solicited for new credit such as credit cards and personal loans. With time and consistent on-time payments, you’ll be back to normal soon. Just keep track of the credit score factors that affect your score to help rebuild it faster. And you’ll even be able to qualify for a car loan or other type of financing.
Steps to Protect Yourself From Medical Debt
You can’t prevent every illness, but you can prepare for the unexpected health event that can devastate your finances with a few key habits.
- Build an emergency fund large enough to cover your deductible, especially with high deductible plans common in Florida. Automatic transfers make saving painless.
- Every year, review your insurance to know what your insurance plan covers before you need it. Know your copays, your out-of-pocket limits, and which local hospitals are in-network.
- First, ask the hospital for an itemized bill. Many hospitals will work with you to pay for their services by offering payment plans, discounts, or even charity care. Errors on your bill are far more common than you think.
- Talking to a professional early on when debt is rising sharply ensures you understand all of your options before being taken over by collectors.
Taking steps as soon as possible keeps all of your options open. Even one step can reduce the shock of an unexpected bill. All of these steps combined create a safety net that allows you to concentrate on your recovery instead of worrying about the mail.
Frequently Asked Questions
Does medical debt disappear in bankruptcy?
Yes. In Chapter 7 cases, medical bills are treated as unsecured debt and completely discharged by the court. After discharge, you will not owe any balance on such debt and collectors must cease all contact with you.
Will medical bankruptcy ruin my credit forever?
No. Bankruptcy will lower your credit score when you file, but the negative effect will wear off after a while. It’s usually possible to get approved for credit cards, car loans and personal loans within a couple years after bankruptcy, as long as you continue to make timely payments and keep your balances low.
Should I file before or after treatment?
Wait until your treatment is complete to file for bankruptcy, if possible. Since Chapter 7 bankruptcy can only be filed every eight years, you will want your complete medical treatment to be covered by the discharge rather than having newer bills left out.
How often can I file Chapter 7?
You may get a Chapter 7 discharge every 8 years. Your local bankruptcy attorney can review your bankruptcy history with you to help plan your case.
Get Local Help With Medical Bankruptcy
You do not have to face medical debt alone. The bankruptcy attorneys at Weller Legal Group have helped many clients across the Clearwater, FL, area eliminate debt and take charge of their lives again. Your situation stays confidential, and a friendly consultation can show you exactly where you stand. Call today to schedule a private consultation about medical bankruptcy and start moving toward a fresh financial start.
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