Understanding Medical Bankruptcy

Many people are surprised to find that of the estimated $1.5 million bankruptcies that will be submitted this year, 62% of them will be the direct results of medical issues. Much more astonishing is the fact that of the filing for medical bankruptcy, over 80% basically had medical insurance. Not surprisingly, they were able to rack up medical obligations that strategy nearly $18,000! This really is only $9,000 less than the amounts owed by individuals who filed for bankruptcy due to medical causes that lacked medical insurance..
Of the problem is the aggressive nature of the medical debt collection industry. part while $18,000 may seem like a tiny amount of debt to create a bankruptcy,. When you default on a credit card debt, the odds of you being prosecuted are actually quite slim. More likely is the fact that the banker works with you to establish some type of acceptable payment plan.
In comparison, medical collectors appear to prefer lawsuit. They will frequently file lawsuits in small claims court on portions so small that most other lenders might have not bothered. Since most people aren't used to coping with lawsuits, it is no real surprise that many people worry and resort to filing for bankruptcy protection.
What is a Medical Bankruptcy
Technically speaking, there is no such thing being a 'medical' bankruptcy. The only kinds of individual bankruptcies are Chapter 7 bankruptcy and Chapter 13 bankruptcy. There's no difference by the reason for a bankruptcy.
Broadly speaking, nevertheless, a bankruptcy that's categorized as medical is any bankruptcy that's filed on account of medical reasons. This is often caused by abnormal medical bills, or even a lack of money due to illness. In some instances, it is also the result of someone getting a second mortgage to cover their expenses. If medical problems were the direct cause of the bankruptcy, it can be referred to as a medical bankruptcy.
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The Medical Bankruptcy Equity Act of 2008
An act was introduced to Congress in 2008 which if passed, would give a legal distinction for bankruptcy chapter 7. This Act would exempt $250,000 of home equity for all those filing bankruptcy as a result of medical reasons.. It would also eradicate the means test for individuals filing bankruptcy because of medical conditions. This means that many people with medical obligations that are now forced in to Chapter 13 will be in a position to apply for Chapter 7. The act now offers some aid to caregivers of the seriously ill.