Despite the ACA, many continue to struggle with medical bills

Anyone who has been in need of medical treatment recently can tell you about the high cost of medical care in the United States. In order to attempt to make medical care more affordable for more people, Congress passed the Affordable Care Act (ACA). Since the act has been in effect, it is estimated that the number of uninsured Americans has decreased by 15 million.

However, despite the decline in the number of uninsured, the ACA has not meant the end of struggles with medical debt for many Americans. According to a recent report in the New York Times, 20 percent of those under age 65 continue to struggle with medical debt, despite having health insurance. Furthermore, the report found that 53 percent of those without insurance continue to have financial problems.

Unfortunately, it is clear from the report that medical debt can strike at any time and cause serious financial harm to those affected, regardless of whether they are insured. The financial drain caused by medical bills can lead to significant changes in lifestyle, such as neglecting needed doctor's visits to avoid additional medical bills, taking second (or third) jobs or cashing out retirement accounts. However, many of these lifestyle changes are unnecessary, as medical bills may often be better addressed through bankruptcy.

What bankruptcy does to medical debt

Medical debt in bankruptcy is classified as unsecured debt. Unsecured debt is debt where the promise to repay is not secured by the pledge of collateral. This is different from secured debt, where creditors may seize the collateral pledged if the debt is not repaid (e.g. mortgages or car loans).

In Chapter 7, medical debt, like most other unsecured debts, is quickly discharged in most cases. Once the filer has filed Chapter 7, a bankruptcy trustee reviews the bankruptcy petition, tax records and other paperwork of the applicant. In rare cases, the trustee may need to sell property of the filer and apply the proceeds towards his or her debts. However, in the majority of cases, filers do not own any property that is not covered by a bankruptcy exemption. Consequently, most filers lose little or nothing during the process. Once the sale has been completed (assuming one occurred), the filer's medical debt and other unsecured debt is discharged, eliminating the obligation to repay it.

In Chapter 13, medical bills and other unsecured debts become part of the payment plan. However, the bankruptcy laws only require filers to pay unsecured creditors as much as they would have received in Chapter 7. In most cases, this is very little or nothing. Consequently, medical bills and most unsecured debt ends up discharged at the end of Chapter 13.

An attorney can help you

If your finances are strained because of medical bills, bankruptcy may or may not be the best way to find relief. An experienced bankruptcy attorney can consider your unique situation and recommend the best option for you.