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Eric C. Lewis  
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Does Bankruptcy Cover Medical Bills?

Yes, bankruptcy discharges personal liability on medical bills.

While there is no such thing as a specific "medical bankruptcy," medical bills and liabilities can often be the primary or sole reason for one seeking bankruptcy relief. Many people file bankruptcy to get a fresh start from burdening medical bills. An illness or injury can result in a mountain of medical bills, even for those that have health insurance. Bankruptcy is often the best solution to bounce back and start fresh.

Medical Debt Collection, Judgments and Garnishments

Sometimes, hospitals and doctors will work with patients directly in terms of a payment plan on unpaid medical bills. Unforunately, it is more often the case that unpaid medicalbills are turned over to collectionagencies - many of which do nothing but buy, and attempt to collect, medical debt! Many such collection agencies choose to sue patients and obtain judgments against them for not only the principal balance of the bill itself, but also the fees of collection.

In Indiana, a "judgment creditor" can utilize a number of means of attempting to satisfy a judgment. One such means is a "wage garnishment." Once a judgment is rendered, the judgment creditor can examine the "judgment debtor" to determine what non-exempt assets and wages are available to pay the judgment. It is common to garnish 25% of net pay to satisfy a judgment. For many people, this huge reduction in take home income leaves you with little choice but to either endure the garnishment or seek bankruptcy to stop it.

Medical Bills are the #1 Cause of Bankruptcy Filings

A report and survey in the American Journal of Medicine Volume 122, Issue 8 suggests that approximately 62% of bankruptcies filed are related to medical bills and loss of income due to illness. Also, the study showed, approximately 3 out of every 4 medically-related bankruptcy debtor had health insurance! This shows that many things can lead to unmanagable medical debt, including gaps in coverage, out of pocket expenses and illnesses and events not covered by insurance at all.

Don't rob Peter to pay Paul

Avoid borrowing to pay for medical bills. It is very common for hospital bill collectors to pressure people into using other extensions of credits, home equity lines or liquidation of 401(k)s, for example, to pay the medical bill. Medical bills are dischargable in bankruptcy. Do not liquidate savings from assets that are protected in bankruptcy to pay for bills that you can get rid of in bankruptcy.

One of the most common mistakes people make is using a retirement plan, such as a 401(k) to pay for medical bills or incurring a debt secured by your home, such as a home equity loan. If you are that desperate, you probably should have already given considerable thought to bankruptcy as a better solution.

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2010-2011© Indianapolis Bankruptcy Law Office of Eric C. Lewis

Lewis Legal Services, P.C. is a federal debt relief agency that helps people file for bankruptcy relief.