Whether you should file bankruptcy over one large medical bill that you are having trouble paying depends on several factors, including whether you can handle the debt outside of bankruptcy, or not.
If you have good credit, the bankruptcy will definitely cause it to dip. However, if you can't pay the hospital or medical bill, you'll start to get late-payment notices and the medical provider may even sue you and get a judgment -- neither of which is good for your credit. And you may eventually face wage garnishment or other collection actions.
Non-Bankruptcy Options for Dealing with Medical Debts
Here are your options for dealing with a large medical bill when you have good credit.
Negotiate a Settlement with the Medical Provider
To start, make sure you have resolved all insurance payment issues. Once you have gotten all of the available insurance coverage, consider negotiating a settlement with the creditor. If the bill was for uninsured medical costs, then the medical provider may waive a percentage of the bill. Many hospitals and other medical providers routinely waive or discount bills for patients who are uninsured.
Hospital Care Assurance Program (HCAP)
In addition, under the Hospital Care Assurance Program (HCAP), you may qualify for free or reduced hospital care, depending on your level of income. If you qualify, HCAP will partially or wholly cover expenses for medically necessary services. You should contact your hospital's financial aid counselor to find out more information and apply for HCAP coverage.
Affordable Care Act
Under the Affordable Care Act (ACA) non-profit hospitals that enjoy federal tax exempt status may have to go easier on you and other cash-strapped patients when it comes to medical billing. Under proposed IRS rules, these hospitals will have to provide free or low-cost coverage for low-income individuals. This may apply to you.
To learn more about these and other options, see Managing High Medical Debts.
Medical Debt in Bankruptcy
If you cannot settle the debt and it looks as if the creditor may pursue you for payment, then your good credit is going to take a hit anyway because a collection action will show up on your credit report. And if the provider sues you and gets a judgment, it can garnish your wages or take other collection action. For these reasons, bankruptcy may be a good option to get rid of the debt and get you back on the road to financial recovery.
Chapter 7 Bankruptcy & Medical Debt
If you do not earn a lot of money and have assets with little or no equity, then a Chapter 7 bankruptcy may be a good choice for you. You don't need to have a lot of creditors or bad credit to file Chapter 7. Indeed, many debtors file Chapter 7 on a single, but substantial, debt. Medical debt, like most other unsecured debts, will be wiped out in Chapter 7 bankruptcy. (To learn more, see Medical Debt in Chapter 7 Bankruptcy.)
Chapter 13 Bankruptcy & Medical Debt
If you don't qualify for Chapter 7 bankruptcy, or you own assets that you might lose in a Chapter 7 bankruptcy, you can file for Chapter 13 bankruptcy. In Chapter 13, you will have to pay back a portion of the medical debt through your repayment plan, and then the remainder will be discharged. (Learn about unsecured debt in Chapter 13.)
To learn more, visit out Chapter 13 Bankruptcy area.