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Filing Bankruptcy Due to Medical Bills

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 put a significant dent in your financial well-being. You might wonder if declaring bankruptcy on an overwhelming medical bill can be a possibility.

Let’s have a closer look.

Medical Bankruptcy 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. Many individuals struggle to pay the cost of healthcare and get burdened by overwhelming bills.  Remember to access the refunds/offsets offered under Medicare and your Private Health Cover (if held), as this could substantially reduce the actual out of pocket expense.


According to the Australian Financial Security Authority, around 10% of the bankruptcies filed 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.

How To Avoid Bankruptcy Due to Medical Bills?

While bankruptcy caused by medical bills can be frightening, fortunately, there are ways you can avoid going bankrupt. Here are some tips to help you:

Never Ignore Your Bills

Medical bills can have an impact on your credit score, just like other bills. If you neglect to pay your medical bill, it can drastically reduce your credit score. 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.

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

Try Negotiating a Lower Rate

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

Don’t Use Your Credit Cards.

Credit cards can undoubtedly take you on the path of bankruptcy if you are not careful. It is always wiser to avoid using credit cards unless you are absolutely sure you can immediately pay back. Medical bills are extremely high, and if you neglect paying back the credit card bill, the amount can keep increasing.

Try to work out a payment plan with the hospital if you only have credit cards with you at the moment. Pay a small percentage of the bill and request them to allow you to make the remaining payment later.

Options for Medical Bill Debts

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

Apply for Financial Assistance

Various hospitals provide financial assistance programs to people who are unable to 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 aid.

Take Out a Bank Loan

Getting a bank loan to pay for medical bills is one of the most popular ways for people to get the money they don’t have. This is a reliable way to pay off the medical bills, but you would have to apply and qualify to get the loan, which can take time. Moreover, you would also have to pay interest on the loan amount, so it is best to consider other options first.

Start Fundraising to Pay Medical Debt

Crowdfunding is an effective means of raising funds from people, including family and strangers, to pay for your medical bills. You can create a medical fundraiser and share your story. You will be surprised at the amount of support you would receive that can not only help you pay the medical bill but prevent you from going bankrupt.

Ways to Manage Medical 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 make efforts to pay the remaining ongoing debts in time. It is a great way to rebuild your credit.

Use Other Types of Credit

Using different kinds of credit might be challenging after bankruptcy, but it might help demonstrate your capability to manage multiple accounts successfully. 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 generally are more liberal with their lending but charge very high-interest rates.


However, keep in mind that you will be considered a risky borrower, which means the interest rates would be higher than the normal interest rates. The good thing is that sticking to paying loans on time would greatly help you rebuild your credit.


Bankruptcy due to medical bills can be challenging to manage. However, think of it as getting a second chance of getting your finances right. The bankruptcy impact will lessen gradually, and you still get an opportunity to rebuild your credit score slowly. It is essential to get in touch with a bankruptcy professional to help you through the process and give you valuable tips to recover from bankruptcy.


If you have any questions or concerns regarding bankruptcy due to medical debt, please get in touch for a free consultation.


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