Tuesday, June 25, 2013

Spouse still on the hook for medical bills after filing bankruptcy?

The health industry is soaring in Portland and around the country, but so are the costs to consumers. A trip to the hospital can have overwhelming financial consequences, whether you have health insurance or not. For example, baby delivery with a one day stay at a local hospital can cost $4,000 or more. It is no wonder then that a family making an average income can quickly fall into a financial whole with no foreseeable way out.

As one might expect, an increasingly common reason for people to file bankruptcy is overwhelming medical debt, and it is dischargeable in bankruptcy. However, recently I have been faced with an issue where one spouse has had to go to the hospital for one reason or another, and incurred a large amount of debt. Married couples faced with this dilemma wish to have the spouse with the medical debt file for bankruptcy, and preserve the credit and assets of the non-filing spouse.

Unfortunately, spouses are responsible for each other’s medical debt. Under Oregon’s “family expense statute,” spouses are liable for certain types of debts, including medical debt, contracted by the other spouse during the course of the marriage. ORS 108.040. The property of both, or either, may be charged for expenses of the family, and both may be sued jointly or separately for those expenses. Medical bills, even if ultimately unnecessary, are considered “expenses of the family.” Hansen v. Hayes, 175 Or 358, 365, 154 P2d 202 (1944).

What this means for bankruptcy is that both spouses must file bankruptcy in order to discharge the medical debt of the spouse that incurred it. If only one spouse files for bankruptcy, the creditors can still go after the non-filing spouse to collect the debt.

Failure to pay a debt, medical or otherwise, can result in several life changing financial consequences. A creditor can send the debt to a collection agency, severely damage your credit score, or file a lawsuit and obtain a garnishment.

A trip to the emergency room or some other major medical procedure can be very stressful. You do not have to live with the burden and anxiety of insurmountable medical debt for years following that medical procedure. You may be able to eliminate medical and other debt through bankruptcy. For more information on Chapter 7 and 13 bankruptcies, visit www.pacificbankuptcy.com. You can call and schedule a free consultation to find out whether bankruptcy is right for you by calling 503-352-3690.