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Medical bankruptcy rates expected to soar

Although all Tennesseans are now allowed access to health insurance due to the Affordable Care Act, their financial problems are not necessarily solved. Although insurance pays for a large portion of one's medical expenses, it doesn't pay for everything. Co-pays and coinsurance must be paid out of pocket, which means that many Americans are left with medical expenses totaling thousands of dollars. It is expected that soon, medical expenses will be the most common reason for bankruptcy, beating out mortgage debt and credit card bills.

Shockingly, it's not the uninsured who are filing for bankruptcy. Most people who file for bankruptcy due to medical bills have insurance. It's just that their insurance of choice is typically a high-deductible one that covers very little. Plus, medical expenses are rising rapidly, well beyond the typical inflation rate, which means many consumers are struggling to keep up.

A medical bankruptcy is similar to any other type of consumer bankruptcy. There are two options: Chapter 7 and Chapter 13. Chapter 7 bankruptcy wipes out debts completely, while Chapter 13 reorganizes the debt into a payment plan that is more manageable.

Those who are drowning in debt have the option to negotiate with the hospital or seek financial assistance from state or national organizations. If the debt is still too much to handle, it is advised that the patient file for bankruptcy after the medical expenses are done, if possible. This is so the debt doesn't mount - again.

The medical debt collection process happens very quickly. When people are unable to pay their medical debt, it can tarnish their reputation and good credit. Bankruptcy can do that as well, but it allows consumers to start over on the right foot.

Source: Fox Business, "Medical Bankruptcies are Still a Problem, Here's What to Expect," Donna Fuscaldo, Feb. 18, 2014

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