Filing Bankruptcy Due to Medical Bills

In a medical emergency, the last thing you worry about is paying the bills, as getting better is the top priority. However, medical bills can quickly pile up and significantly dent your financial well-being. You might wonder if declaring bankruptcy on an overwhelming medical bill is possible.  

Medical Bills Bankruptcy Guide in Australia

While solely applying for bankruptcy because you can’t pay the bills might not be an option, some bankruptcies occur due to medical debt. The cost of healthcare is high, and many people struggle to pay their bills. Remember to access the refunds and offsets offered under Medicare and your private health coverage (if held), as this could substantially reduce out-of-pocket expenses.

The Australian Financial Security Authority states that only a small percentage of bankruptcies are linked to medical bill issues. Although health insurance covers various medical treatments, private and dental hospital surgeries are usually not included in the list. These can result in higher medical care costs that create major financial issues for people who often end up declaring bankruptcy.

Should I file for bankruptcy to pay out medical bills?

While medical debt-related bankruptcy is conceivable in Australia, it is uncommon because we have Medicare and the majority of people have private health insurance.  However, if you find yourself with overwhelming medical bills, it can be daunting, but bankruptcy may not be the best option. Fortunately, there are ways you can avoid going bankrupt over medical bills in Australia. Here are some tips to help you:

Never Ignore Your Medical Bills

Unpaid medical bills can impact your credit score, just like any other unpaid bill.  It is wiser to inform the hospital, insurer, or healthcare provider that there will be a delay in the payment or ask them if you can follow a payment plan.

Making a small medical bill payment is much better than completely ignoring your bill, as it maintains a better relationship with the recipient. If you don’t have sufficient funds to make the payment, ask about any financial assistance programmes that can help you.

Try Negotiating a Lower Rate

It might seem daunting, but negotiating the rate can be worthwhile. You can call the billing office and enquire whether they can accept a lower rate. You might hear “no,” but you can still try to be persistent. Sometimes, they can even offer other options to help with the payment.

Don’t use your credit cards.

Credit cards can undoubtedly lead you further into debt if you are not careful. It is always wiser to avoid using credit cards unless you are sure you can immediately pay them back. Try to work out a payment plan with the hospital, insurer, or healthcare provider. Pay a small percentage of the bill and request that they allow you to make the remaining payment later over time.

Other Options Instead of Filing Bankruptcy on Medical Bills

Here are some of the options that can help you pay your medical bill debts and avoid bankruptcy:

Apply for Financial Assistance

Various hospitals provide financial assistance programmes to people who cannot pay overwhelming medical bills. If you are uninsured, unemployed, or need additional financial help to pay the bills, ask the hospital about their financial assistance.

Take Out a Bank Loan

Getting a bank loan to pay medical bills is a reliable way to pay them, but you would have to apply and qualify to get the loan, which can take time.

Ways to Manage Medical Bills Bankruptcy

If nothing else works and the only way out is bankruptcy, you must start focusing on rebuilding your credit after declaring medical bankruptcy. Here are a few ways you can manage your bankruptcy and improve your credit:

Ensure Ongoing Debts Are Paid in Time

Even though your medical debt would be discharged because of the bankruptcy, you might still have other loans that aren’t covered under the bankruptcy. It is crucial to pay the remaining ongoing debts on time. It is a great way to rebuild your credit.

Use Other Types of Credit

Using different kinds of credit might be challenging. This can be in the form of new loans or other credit cards. However, use extreme caution if looking to borrow with ‘payday lenders,’ who are generally more liberal but charge very high-interest rates.