Medical Records and Bankruptcy Due to Medical Bills

Bankruptcy can happen to you or your community hospital.

What Happens to Patient Records in case of hospital bankruptcy?

Hospital bankruptcies are becoming more common, even in a world with more patients, more treatments, and more medications.

Who Becomes the Holder of Records with Closures?

If a hospital closes, it must plan for records management, and typically the organization is still liable for keeping PHI safe and secure. A closed hospital can transfer the patient records to another entity, which then agrees to accept responsibility. For example, in the scenario of a hospital being sold, the new holder of the data could choose to archive the records securely or convert them into their system.

Should no healthcare organization want to take ownership of the medical records, a reputable commercial storage firm can then hold those medical records. Any impacted patients must be formally notified of the hospital closure and where they can access their records. Bankruptcy will not protect these entities from doing their due diligence when maintaining and providing access to the data.

But what happens if you file personal bankruptcy because of medical bills?

If you file for bankruptcy on medical bills, the court will most likely grant your petition and discharge any debt due to your medical provider. However, the discharge only applies to that specific provider. At this point, it becomes crucial to understand what type of bankruptcy you are filing for.

If you file Chapter 7 bankruptcy on your medical bills, all other debts will be discharged except those incurred for property taxes and student loans. The debts discharged under a Chapter 7 petition must be related to a transferable asset like a house or car you may have been forced into foreclosure or repossession.

Chapter 7 is also referred to as a “straight bankruptcy.” You get to keep any debts incurred for property taxes, including back payments, and student loans, as these are not considered assets and are asked for repayment. If you do not pay them off in Chapter 7 bankruptcy, you will remain liable for the full amount without any discharge.

If you file Chapter 13 bankruptcy on your medical expenses, they will be discharged under a different set of circumstances. The law states that debts acquired for luxury items like vehicle and home payments can be discharged in a Chapter 13 petition, but only if they absorb greater than 20% of your disposable income. However, this rule is very specific. If your income is above a certain threshold, your vehicle payments, car insurance, and home mortgage all fall under the “luxury exception.” In fact, if you are making less than $150,000 per year, then any expenses incurred will be included in the 20% disposable income rule.

If your income is below $150,000 per year and you have too many other debts to qualify for Chapter 13 bankruptcy protection, it may actually be better for you to file Chapter 7. This is because the non-dischargeable debts in a Chapter 7 case are limited only to those incurred for property taxes and student loans, as stated before.

If you have medical bills with your Chapter 7 or Chapter 13, it is advisable to ask an attorney for legal advice before filing bankruptcy.

Do medical bills go away when you file bankruptcy?

That depends on what you mean by “bankruptcy.” If you file for Chapter 7 bankruptcy, any debts unrelated to property taxes or student loans would be discharged if approved. However, if your income is above $150,000 per year and the debt pertains to a vehicle or home loan that exceeds 20% of your disposable income, then it would not be discharged in a Chapter 7 case even if approved by the court.

On the other hand, if you file for Chapter 13 bankruptcy, then the court would grant your petition and obtain a discharge of all debts. In addition to your regular bills, any medical bills that have not been paid can be discharged in a Chapter 13 case if approved by the court.

What happens if you cannot pay medical bills?

If you cannot pay your medical debt in full, you have three basic options: make a lump sum payment, an installment plan, or a settlement agreement with the creditor. While this should not be done without first consulting an attorney, it is often the best possible choice if there is money available but no clear legal option for dealing with it.

If you fail to make your payments, your creditor may file what is known as a “default judgment” with the court and ask the judge to impose sanctions on you. The judge would then issue an order requiring you to make monthly payments agreed upon by both parties and later enforced by collection agents hired by the creditor. The best option for dealing with medical bills is to avoid default judgments by making your payments under an installment plan or settlement agreement with the creditor upon receipt of notice from the other party.

What happens if you file bankruptcy on medical bills?

If you file bankruptcy on medical bills, two significant factors could play a role in whether or not the court approves it: how many creditors are involved and how much money you make per year.

Is medical bankruptcy different from other types of bankruptcy?

Yes. The courts will not always agree on whether a specific debt should be discharged in a Chapter 7 or Chapter 13 case. In some cases, the answer may be clear based on what type of debt it is, but the answer will be more complex in others.

Why are Chapter 13 and Chapter 7 bankruptcy different?

The significant difference between a Chapter 13 and a Chapter 7 case is that all creditors lose in court in a Chapter 7 petition except those incurred for property taxes and student loans if you still owe the payments. Alternatively, in a Chapter 13 case, all creditors lose their debts except those incurred for property taxes and student loans if you still owe them.

What factors determine whether a bankruptcies discharge debts related to medical bills?

If you file for bankruptcy on medical bills, that depends on the size of your debts and your income level.

What happens if I do not pay my medical bills?

If you fail to pay your medical debt, then it may be reported to credit bureaus. Report to credit bureaus is a free service that will give creditors information about your bankruptcy and make it more difficult to obtain credit.

If you have already filed for Chapter 7 or 13 Bankruptcy protection, the creditor can still report this information even though they are protected by law from doing so. This means that any future loans could be denied because of previous bad debts. You should also know that once these reports appear on your record, it stays there forever. It does not go away until all of your accounts are paid in full.

The best way to avoid having a bankruptcy reported is to pay off as much debt as possible before filing for bankruptcy. If you do file for bankruptcy and then try to make payments after the fact, you will likely end up with more problems than if you had never tried to repay them at all. The creditors may take legal action against you, and your credit score might suffer greatly.

What is Bankruptcy?

Bankruptcy is a legal process in which a person incapable of repaying debts seeks legal relief from some or all of their debts.

Under the U.S. Constitution, you can relieve parts or all of your debts if you can no longer meet obligations to creditors and lenders. Proof that you cannot pay back these debts is required, and a repayment plan is also required in the case of a Chapter 13 bankruptcy. Bankruptcy is also likely to involve the court seizure and liquidation of some or all liquid and non-essential assets to repay creditors.

There are two major types of personal bankruptcy in the United States. Chapter 7 bankruptcy allows debtors to discharge part or all of their debt. Chapter 13 bankruptcy instead has debtors repaying part or all of the debt based on a payment plan.

What is Chapter 7 Bankruptcy?

With Chapter 7 bankruptcy, you can have parts or all of your debts discharged. This would happen after your assets are liquidated and used to repay a portion of the debt.

What Are Liquid Assets?

These are assets that can quickly be converted into cash, such as checking and savings accounts. Some of these liquid assets must be turned over to the courts and distributed among your creditors as partial repayment of the owed debt.

Assets that can’t be used to repay debts in bankruptcy are called exempt assets. Each state has laws on which liquid assets are exempt and non-exempt for bankruptcy. General examples of exempt assets may be a house, retirement funds, or professional tools, while examples of non-exempt assets may be jewelry, sports cars, or flatscreen TVs. It is still advisable to check your state and local laws for what is considered seizable and exempt from seizure.

After non-exempt liquid assets are distributed to creditors, the remaining debt is discharged. Then you are no longer liable for any of the debt discharged. Then neither creditors nor third-party collectors can attempt collection on these debts.

How Do I Qualify?

Qualifying for Chapter 7 requires passing a means test proving that your income is less than the median income, taking into account your family size in your state. Those who fail the means test will not be allowed to file Chapter 7 and must instead file Chapter 13.

Additionally, after the means test, individuals must receive credit counseling from an approved credit counseling agency. These approved credit counseling agencies can be found on the website of the U.S. Trustee Program.

Should I file for Chapter 7 Bankruptcy?

Filing for a Chapter 7 bankruptcy, or any bankruptcy, is a serious matter that holds a lot of questions. How much debt do I have to accumulate before I qualify? What will this do to my credit score? Should filing for bankruptcy only take place at a certain time? There aren’t exact answers to these questions, and they could easily vary depending on your circumstances. However, a good rule of thumb is that you should at least consider filing if your debt is continuously accumulating, or you cannot pay off monthly cycles and your income is low enough to qualify for a Chapter 7 bankruptcy.

What is a Chapter 13 Bankruptcy?

With Chapter 13 bankruptcy, you must repay a portion or all of the debt through a 3-5 year repayment plan. When making the personal bankruptcy filing, you will submit the repayment plan to the court. After submitting this plan, you should begin making payments to the court. The court will then manage payments to the creditors. This step is required even if the plan hasn’t yet been approved.

There will then be a hearing to approve your payment plan, which might take a few weeks. Creditors are allowed to object to the payment amounts. However, the judge has the final say. After the plan has been approved, you will continue making the payments to the court. Once the payment plan is completed, the remaining debt is discharged, and you are no longer liable for the remainder.

If you are a farmer or fisherman, you may want to consider filing for Chapter 12 bankruptcy. Chapter 12 bankruptcy is similar to Chapter 13 but can provide additional benefits to farmers and fishers in certain circumstances.

Should I File for Chapter 13 Bankruptcy?

You might decide on Chapter 13 instead of Chapter 7 if your debt consists of secured loans (like car loans) that you wish to continue paying. Chapter 7 bankruptcy requires you to give up some liquid assets, but if you want to retain some of your liquid assets, Chapter 13 could be a better option. Also, if your income is above the median (for your state and family size), you won’t be able to file Chapter 7 bankruptcy.

In filing Chapter 13, according to the U.S. Bankruptcy Code, you may not have more than $922,975 secured debt and $307,675 unsecured debt. Unsecured debt includes things like credit card debt and medical loans.

As in Chapter 7 bankruptcy, you must use an approved credit counseling agency to receive credit counseling from.

Filing for Bankruptcy

Filing personal bankruptcy can be a complex process and can have ramifications for your credit score. It is crucial to seek advice from a bankruptcy attorney before filing. It is vital to ensure your paperwork is filed accurately and completely.

Depending on your state’s laws, certain types of loans and expenses can be more difficult to discharge in bankruptcy, such as student loans and child support payments.

Note that things such as federal student loans, alimony, child support, taxes, debts from injuries in a DUI, fraudulently obtained loans, and certain debts incurred within six months prior to the filing cannot be discharged. If your debt is with a co-signer, it may be challenging to discharge, as this would mean that the co-signer would be required to pay the entire debt.