Thursday, November 8, 2012

Is there such a thing as a "Medical Bankruptcy" in Oregon?

Chapter 7 & 13 Attorney Ryan Hackett
I get a lot of people asking me if there is a specific sort of bankruptcy to deal with medical debt. Although medical debt is a very common debt to include and discharge in a bankruptcy, there is not such thing as a "medical bankruptcy". Generally, medical debt is treated as a general unsecured debt in both Chapter 7 and Chapter 13 bankruptcy. This means that a debtor will be able to discharge the debt, just as if it were a credit card, or other typical consumer debt.

I see a lot of clients who have been carrying the enormous burden of medical debt. When a consumer is unable to pay a medical provider the debt is usually transferred to a third party debt collector. These debt collectors can be very aggressive and they don't really care why someone has the debt - they simply get paid to collect regardless of the source. Many times the debt collector will file a lawsuit to collect on medical debt. Once a lawsuit is filed it is very hard to fight it unless a debtor can show that the original debt belongs to someone else. If the collector prevails in the lawsuit, or the debtor simply does not respond to the suit, the collector will get a judgment against the debtor. Once a judgment is in place, the debtor can have his or her wages and bank accounts garnished. Also, a judgment will typically place an automatic lien on any real property owned by the debtor. In Oregon a collector with a judgment can garnish 25% of a debtor's net pay.

Many people come into my office because they are being garnished by a collector for medical debt. I would estimate that 40 - 50% of my clients have some medical debt and sometimes this is the only debt they have. Even though there is no such thing as a "medical bankruptcy" a Chapter 7 or a Chapter 13 bankruptcy is a viable way to eliminate medical debt.