Myths And Misnomers Of Medicare Bankruptcy

Sometimes people will talk about Medicare bankruptcy or refer to "your Medicare debt." Actually, while economists argue over whether Medicare might cause the federal government to go bankrupt, it is not the cause of personal bankruptcy.

Medicare's $100 a month premium, might be steep for someone living on a small, fixed income. That, coupled with the fact that it pays only eighty percent of medical bills, might mean that Medicare fails to prevent bankruptcy in cases where medical bills are high.

Medical expenses are one of the leading causes of bankruptcy in the United States. Although this is often refereed to as "Medicare bankruptcy", there is actually no such thing. All bankruptcy cases are properly categorized by the chapter number of the bankruptcy law. Most people file for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 is also known as a straight bankruptcy. It is the chapter that covers unsecured debts like medical or credit card bills. Often, a person who has a high number of medical expenses attempts to pay with credit cards. When he becomes overwhelmed, he files for bankruptcy citing credit card debt as the primary cause of his financial collapse.

Those filing under this chapter are seeking to have their debt reduced or forgiven. Although this part of the law can require that the filer sell or forfeit some of his property or income to make at least partial payment on his debt, Medicare and Social Security benefits cannot be touched.

Chapter 13 covers debts that are secured by property. It is a less drastic type of bankruptcy that asks only for refinancing of debt. While medical bills are generally unsecured, they are often considered in court since the judge looks at the petitioner's whole financial situation in order to work out a debt restructuring plan for him. It is not unusual for unsecured loans such as medical bills to be pardoned in a Chapter 13 case as well.

Catastrophic debt can have multiple sources and still be covered by one chapter of the bankruptcy code. If you are considering asking the court for debt relief, see an attorney who specializes in these cases. He can review your situation and suggest which path is right for you.

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