While it was relatively easy to file for bankruptcy prior to the 2005 bankruptcy law amendment, the new medical bankruptcy rules under the new bankruptcy laws passed in October 2005 are stricter, more stringent in nature. The changes were made to stop bankruptcy abuse especially under Chapter 7 where many people filed bankruptcy to escape their debts even if they were still capable of paying it, or there were still other avenues available to get debt repayment options, but chose to go for with liquidation bankruptcy instead.

Though it may be true that there are those who try to beat the system even under the firmer bankruptcy rules, for most families who suffer a blow from a serious illness or disability of a family member and could not cope with the expensive medical bills, filing for medical bankruptcy is their only choice to be free of debt.

If it so happens that you are considering bankruptcy due to enormous medical debts that you can no longer handle paying, remember that there are medical bankruptcy rules to follow and conditions to fulfill. But if you are planning on getting rid of your medical debts only and exclude all your other debts, then you have another thing going for you. Filing for medical bankruptcy does not concern your medical debts alone; it covers all the debts you incurred and all your creditors must be given notice.

‘Medical’ bankruptcy exists because large unpaid medical bills and expensive medicine overheads drive people to file for bankruptcy. In fact, such term does not exist in bankruptcy courts. It is just a convenient way for people to clarify what brought them to file for bankruptcy. Medical bills must not be treated differently from other kinds of debts such as credit cards, home or car loans and mortgage debts. You cannot just file bankruptcy to deal with your medical debts and leave all your other debts untouched. There are no special provisions for medical bankruptcy. Instead, everything you owe, own and treasure will be put on the line for assessment before the state can give you a clean slate financially.

There were a number of changes made to the bankruptcy laws, which altogether concerns dealings on medical bankruptcy laws. The changes to the rules in bankruptcy were imposed to shift those who file for bankruptcy under Chapter 7 in which debts are discharged and non-exempt properties are liquidated to pay creditors, to Chapter 13 wherein debt reorganization is place to pay off debts in a period of five years. Medical bankruptcy rules state that all medical bills are eligible causes for a debtor to file bankruptcy for debt relief under Chapter 7 or Chapter 13 bankruptcy laws which is debt discharge or debt restructuring, respectively.

Under new rules, filers are required to forward their federal tax returns as proof of income. If the filer has not filed for a federal tax return before, he must do so before filing for bankruptcy. Using the income guidelines, those who qualify to file for bankruptcy under Chapter 7 must have an income that equals or below the median income in the filer’s state. Specifically, if the income falls above the median, the bankruptcy court will require the filer to undergo a means test. Here, the income and debts of the filer for the past six months will be assessed to determine if there will be a leftover amount to his income after deducting necessary reasonable expenses to pay off his creditors.

As to what constitutes reasonable expenses, the Internal Revenue Service rules will serve as guidelines. Failing the means test disqualifies a filer to file Chapter 7 bankruptcy; however, he is still eligible to file under Chapter 13 bankruptcy which is basically a debt repayment plan, should he choose to continue to file for bankruptcy. Mandatory credit counseling through a government approved program is another highlight of the new bankruptcy laws. The course must be taken prior to filing for Chapter 7. The reason for this mandatory counseling is to give the filer the chance to rethink his decision on forgoing bankruptcy.

Medical bankruptcy rules are the same. Aside from the federal tax returns, more documentation is necessary to prove that the filer is in good-faith in filing for bankruptcy. Such documents would include documentation from credit counseling, list of secured and unsecured creditors, monthly income and expenses, assets and liabilities, identification card and pay slips. Heftier legal fees should also be expected as bankruptcy lawyers are given more tasks to justify their client’s claims. He has to do more investigation and fact-checking to confirm the figures presented by his client.

With all these changes, your chances for a fresh start could be in jeopardy. When the going gets tough, you would not care anymore. Health care costs are getting higher; your income is draining rapidly and you are emotionally fed up. Of course, you would want to get out of that situation as fast as possible. The changes may limit your chances of getting that breathing space though. But with the help of a trusted bankruptcy attorney, you could go for alternative routes. So before you decide to file for bankruptcy, think of the medical bankruptcy rules and rethink your choices.