This personal bankruptcy story was posted on the internet in March of 2008 as a comment in a discussion on bankruptcy: “Last July I had surgery to remove a kidney stone that I suffered with for 5 months and was stuck. I was in the hospital for a week. After calculating all the various doctor, ambulance and hospital fees I owe over $100,000 for this ordeal!!! The hospital stay alone was $90,000! Did I mention no medical insurance??? I’ve been totally stressing over this. I’m not sure what’s more painful…..my debt that I can’t possibly pay or the kidney stone! I’m saving money so I can file bankruptcy soon.”
Like so many others, medical problems is one of the leading causes for bankruptcy. Not only does medical problems cause enormous expenses, they often cause a loss of income as well. The debtor in this personal bankruptcy illustration had to have surgery to remove a kidney stone and didn’t have any medical insurance. The emergency procedure cost him much more than he bargained for as the kidney stones caused bankruptcy pains as well as physical ones. Becoming bankrupt can happen for a variety of reasons including but not limited to a divorce, foreclosure on personal or business property, failure to pay bills on time, loss of income, health problems, poor business decisions, bad timing, bad advice, or a poor economy.
In the case of the debtor in our illustration, having a medical bill that large is not necessarily a sign he is bankrupt. Many hospitals will negotiate a plan to pay off a bill and often will reduce the amount to be paid. So, the debt may end up being just another payment in a pay out plan on an extended loan. As a general rule of thumb, you are legally financially bankrupt if your current sustainable income will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years. Five years is the maximum legal number of years a United States Bankruptcy Court allows an individual to work their way out of bankruptcy protection. If the debtor can sustain a payment to the hospital over five years, he is not bankrupt.
On the other hand, if he is bankrupt and the hospital will not forgive the debt, filing for bankruptcy protection is a viable option. Just like the doctors removed the debtor’s kidneys causing the problem, the debtor may have to remove the debt causing his financial problems. There are two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13. A Chapter 7, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A chapter 13 bankruptcy is the second bankruptcy available to individuals and is called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts.
If you have an income like the debtor in our illustration and qualify for a chapter 13, there are certain advantages for filing one. These advantages are: to save your home from foreclosure; to reschedule secured debts; to provide protection for co-debtors; to consolidate your loans under one plan; to keep non-exempt property; to extend certain tax obligations, student loans, or other such qualifying debts; and to qualify for bankruptcy relief. While filing a Chapter 13, the debtor in the illustration could still keep his home, and the courts could work out a suitable solution to pay what he can to the hospital. Depending on how much pressure the hospital might apply in the collection process, the debtor could conceivably return to a normal lifestyle, less good credit, pretty quickly.
Bankruptcy laws are complicated, and common sense indicates you will need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt, contact us today. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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