Bankruptcy is the legal status of a person, or an organization, who cannot repay all their debts from certain creditors. In the United States, more than half of the bankruptcy filings are due to medical bills. Now, before we take a peek on medical bankruptcy statistics, let us define what Medical bankruptcy really means.

What is Medical Bankruptcy?

There really is no such thing as Medical bankruptcy. The term Medical Bankruptcy was just coined to differentiate bankruptcy due to loans and unsecured debts from medical debts. Therefore, it is a state of deficiency in financial issues due to medical bills. This occurs when a person could not pay his/her medical fees which include laboratory fees, consultations, therapies, medicines, and other needed procedures with respect to his current salary wage. This now imposes a big threat to the United States as the numbers of medical bills bankruptcy is getting higher each year.

According to the United States Courts bankruptcy statistics, the medical bankruptcy filings are rising from 2007 to 2011. From 695,575 medical bankruptcy cases were filed during the month of March 2007 it has dramatically increased to 1,531,997 cases filed by March 2011. This 44% increase in medical bankruptcy filings is mainly due to the ongoing recession and the rising cost of health care. What surprising is about this is that most of the filers had health insurance. Most of the cases are from middle class families who are breadwinners and got ill but there’s still a large number of bankruptcy filers from the uninsured.

When can a person file for medical bankruptcy? In United States, all medical debts are entitled to either a debt discharge or a repayment plan of debts for a certain period, stated under Chapter 7 and Chapter 13 bankruptcy laws, respectively. In Chapter 7, all unsecured debts, loans and including medical bills could be wiped out but the counterpart is you cannot file again for the following 6 years. Also, before filing under Chapter 7, you will be assessed for your income and other liabilities being handled to ensure that you are not really capable of paying the debts you owed. Otherwise, you will be covered under Chapter 13. In Chapter 13, a restructuring of payment for the debts will be settled for a period of five years.

Under the rules of the bankruptcy laws, a filer must present his federal tax returns ahead of time before filing bankruptcy. That is to assess the filer of its income as to whether he/she is eligible to what Chapter he/she could be. If the filer’s income is on the median salary and below, he/she will be handed to Chapter 7. If not, Chapter 13 would do. Filing for medical bankruptcy does not only cover medical bills but it also includes unsecured debts and loans from different organizations and creditors. All creditors will also receive a notice of the bankruptcy. That means all debts are being considered here.

So what can you do to keep your finances afloat with rising medical costs and avoid filing for medical bankruptcy? Here are a few simple tips to consider.

1. Know your insurance company, their rules and policies. Do not be hesitant to ask questions. You may be paying for unnecessary fees that can be avoided by asking questions and understanding your policy.

2. Do not ignore your medical bills. You might end up questioning the hospital for those fees in the latter. Keep all your receipts and medical documents for liquidation purposes.

3. Try to negotiate with your doctor and medical insurance. A lot of them are willing to help make your payments easier and help reduce your bill.

4. Don’t be afraid to do some comparison shopping. Shop around for clinics that offer cheaper laboratory fees or try generic versions of the drugs that you need.

In this tough economy, it’s becoming harder to get by. More so if you get sick or injured. Regardless of the temptation to just file for medical bankruptcy as a solution, don’t risk your credit and your pride on something that can be avoided. With a little bit of creativity, healthy living, and some bargaining, you can find lots of ways to avoid becoming part of the medical bankruptcy statistics.