Medical debt is one of the most common reasons people seek bankruptcy relief in Australia. However, the question is, can you file bankruptcy on medical bills? These days more and more individuals are accumulating their debts to a level where they are unable to repay their creditors and are officially declared bankrupt. According to Australian law it is possible to file for bankruptcy due to medical bills debt, and about 10-11% of the Australians claim “ill health” as a cause of bankruptcy. A study done at Harvard University indicates that the accumulation of medical costs is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies.
When one encounters an unexpected and serious injury, this may rapidly result in hundreds or thousands of dollars in medical fees, often draining one’s savings. Even though piled up medical bills are eligible costs for filing a bankruptcy, there are some options available that can help financially families and individuals and avoid economic failure.
The pros and cons to filing a bankruptcy
If you’re thinking about filing a bankruptcy due to your medical debt, you should take a deeper look and review the pros and cons of filing bankruptcy.
On one side, you should know that filing bankruptcy for medical reasons is just like filing for any other reason, it is exactly the same process and will affect your credit in exactly the same way. However you may end up in a better position in the long run or at least in a pretty good position in a fairly short time.
Apart affecting your credit score, a bankruptcy can also affect your ability to get a loan and a mortgage, or you may end up paying a higher interest rate because lenders may see you as more of a risk.
One of the biggest benefits to filing bankruptcy is that you get a clean start and you can focus on rebuilding your life and financial future. You get no longer threats from creditors and collectors since your debt has been lifted up and you are free from the pressure you have had from it. Still, after bankruptcy, it is advisable to continue with financial counselling.
Do I have an alternative to medical bankruptcy?
In all cases prevention is better than the cure, and in this case having medical and additional insurance can help in debt management. There are fundraising possibilities that can provide financial help and by which many repay their bills. These possibilities can vary from online medical fundraising, community help, agreements with hospitals to grants from non-governmental organizations.
One of the best things to do is to classify the medical bills and have a clear overview of all belated payments that need to be done. One of the “don’ts” is not to answer your creditors. You should always use the chance to ask for prolonged deadline or help.
If hospitals bills prevail try contacting the hospital and see if they have funding programs by which they can help with these costs, or if a least they can postpone the date for paying the bills, while you seek other opportunities for fundraising. Online fundraisers are very popular and many people use it for getting finance for treatment. There are free platforms available where you can start and share a fundraiser. And lastly, there are non-governmental organizations that can provide grants for medical purposes which can be used for medical bills and by that to avoid bankruptcy.
1) 5 Common reasons individuals fall into personal bankruptcy: http://debtfreeaustralia.com.au/5-common-reasons-individuals-fall-into-personal-bankruptcy/
2) Causes of personal insolvency: https://www.afsa.gov.au/about-us/annual-report/previous-annual-reports/annual-report-2010-2011/general-administration-of-the-bankruptcy-system/causes-of-personal-insolvency
3) How Do I Avoid Bankruptcy?: http://www.bankruptcyinaustralia.com.au/articleavoidbankruptcy.cfm