Navigating Medical Bills: Is Bankruptcy a Viable Solution?

Should I file bankruptcy for medical bills

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By Bromwich+Smith Staff | 1500 words | Reading Time: 7 minutes | Last update: 2024/02/07

As Canadians, we have likely compared our health care system to those in other countries. We boast about our free healthcare, however not all medical costs are covered in Canada. Often hospital visits and doctors’ bills are only partially covered by Canada's health care system. Out of pocket costs can include medicine an equipment as well as upgrades and other expenses required to accommodate your medical condition. This means health care issues can cause severe financial challenges for Canadians.  

The biggest financial impact may be loss of income if you are required to take time off work to recover from your medical condition. Your employer may top up your health insurance wages or sick benefits from employment insurance however this will only cover portion of your salary which could put a financial strain on your bank account. 

So, should you consider filing for bankruptcy to cover your medical bills? 

It goes without saying your health, both physical and mental, needs to take priority. Focus on yourself before you're able to think about how you're going to pay for your medical bill debts. If you find that your creditors are calling asking for payment, it is important to let them know about your situation and that you may be unable to pay for the time being.  

When you are able, review your monthly costs to see if you can manage your overall budget without relying on credit. If your medical condition is stopping you from returning to work, you may need to adjust your current budget for the short term. It is always a good idea to explore all resources available including reducing expenses, delaying payments after you have spoken to your creditors and reviewing all benefits available to you. 

Reach out to your health care providers and discuss your situation, as they may be able to offer financial assistance programs, including discounts or payment plans. In all likelihood they will be willing to work with you to find a solution that does not put you into further distress. 

Review your insurance coverage. It is important to ensure that all of your expenses are being covered. There may be discrepancies, and you will need to contact your insurance provider directly to ensure they are covered. Understanding your policy as well as your partner’s benefits will maximize your benefits and reduce out of pocket expenses. 

Consider your options 

Exploring debt repayment plans may help assist you in negotiating with creditors and setting up repayment options. Speaking to a professional like a Licensed Insolvency Trustee will help you understand all  debt relief options. This may cover additional debt you have been carrying including credit cards, personal loans, payday loans, or older student loans. 

Can declaring bankruptcy take care of medical costs? 

The answer is yes, and here are few things to consider: 

  • Unsecured debts are included in a bankruptcy, including hospital fees and other unpaid medical bills; 

  • While bankrupt all income you receive is subject to the surplus income rules, so if you are receiving sick benefits or a disability income, that is part of your income; 

  • Medical expenses that you pay directly can be used to reduce your income, so if you are paying for prescriptions or other expenses, those expenses will reduce your surplus income obligations, subject to certain conditions that your Licensed Insolvency Trustee will explain.  

  • Bankruptcy immediately gives you an automatic stay of proceedings, stopping all creditor actions.   

  • Bankruptcy can be over within less than 9 months from filing, if it’s your first bankruptcy. 

  • Bankruptcy eliminates your debt and gives you a fresh start. 

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It is important to understand the long-term effect of filing bankruptcy on both your financial and personal relationships. From a financial standpoint filing for bankruptcy will impact your short-term ability to secure credit until you are able to fulfill your bankruptcy obligations and showcase yourself as credit worthy to potential creditors. Your Licensed Insolvency Trustee will be able to talk you through the pros and cons to filing for bankruptcy and help you understand the full implications to your credit score and when you will be able to start rebuilding your credit.  

Filing for bankruptcy can be emotionally difficult. Understanding this emotional toll is vital which is why we encourage you to have a strong support system in place. Have people around you that you can talk to about your finances and how you're feeling. We understand that filing for bankruptcy maybe one of the most difficult choices you make. Knowing all options available will help you make the best choice for your financial future. 

When it comes to debt relief, it is important to know that bankruptcy is not your only choice. In fact, fewer than 20% of Canadians who file for insolvency choose bankruptcy. The vast majority of insolvent Canadians file a Consumer Proposal instead. 

Every financial situation is unique and what works for one person may not work for another. While bankruptcy is intimidating it is a strong option for many Canadians struggling with debt. If it is determined that this is the best option for you know that the cons are short lived and you will be able to rebuild your credit again. Speaking to a Licensed Insolvency Trustee will get you back on track today. 

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s  Debt Relief Specialists are available by phone at     1.855.884.9243,  Live Chat  or you can request a call back at contact us page. We want to see you flourish!      


1. Is filing for bankruptcy the only option for managing medical bills?

Filing for bankruptcy should be considered as a last resort when dealing with medical bills. Before taking such a significant step, explore alternative options:

Negotiate with healthcare providers for reduced payments or a manageable payment plan.
Investigate whether you qualify for financial assistance programs offered by hospitals or charitable organizations.
Consult with a financial advisor to create a budget and explore debt consolidation.

2.How does bankruptcy affect my credit score and financial future?

Filing for bankruptcy can have an immediate impact on your credit score and financial standing. Here's what you need to know:

Bankruptcy remains on your credit report for several years, affecting your short term ability to secure loans or credit cards  at best rates. Rebuilding credit after bankruptcy takes time and involves time and commitment. While your Bankruptcy shows on your credit report, potential creditors may view you as a higher risk, potentially leading to higher interest rates.

3. How can I assess if my medical debt is eligible for bankruptcy?

Not all medical debts are eligible for bankruptcy, so it's crucial to understand the criteria:

Evaluate the total amount of medical debt, as bankruptcy is often more suitable for overwhelming financial burdens.
Consider the nature of the medical debt; some may not be dischargeable, such as recent medical bills.
Consult with a bankruptcy attorney to assess your specific situation and eligibility.

4. What are the potential consequences of not filing for bankruptcy?

Choosing not to file for bankruptcy may have its own set of consequences; here's what to consider:

Continuous financial stress and potential harassment from creditors.
The risk of legal actions such as wage garnishment or asset seizure.
Difficulty in obtaining certain types of employment or housing due to a compromised credit history.

5. Should I file for bankruptcy due to medical bills?

Focus on your health first. Inform creditors about your situation and explore budget adjustments. Contact healthcare providers for financial assistance. Consider debt repayment plans and consult a Licensed Insolvency Trustee for a comprehensive understanding of options.

6. Can bankruptcy cover medical costs?

Yes, bankruptcy includes unsecured debts like hospital fees. Surplus income rules apply, and direct medical expenses can reduce obligations. Bankruptcy offers an automatic stay of proceedings, typically concluding within 9 months. It eliminates debt, providing a fresh start.

7. What are the immediate effects of bankruptcy?

Bankruptcy halts all creditor actions with an automatic stay. It lasts less than 9 months for first-time filers, offering debt elimination and a fresh financial start. However, it impacts short-term credit availability until obligations are fulfilled.

8. How does bankruptcy affect credit and personal relationships?

Bankruptcy affects short-term credit, requiring time for rebuilding. It's crucial to understand the impact on personal relationships. A Licensed Insolvency Trustee guides through pros, cons, and implications for credit score.

9. Is bankruptcy the only option for debt relief?

No, bankruptcy is one of many options. Most insolvent Canadians prefer a Consumer Proposal. Financial situations vary, and consulting a Licensed Insolvency Trustee helps determine the best approach for individual circumstances.

10. How does bankruptcy handle income during the process?

Bankruptcy considers all income under surplus income rules. Sick benefits or disability income are part of the income calculation. Direct medical expenses can reduce surplus income obligations.

11. What is the emotional impact of filing for bankruptcy?

Filing for bankruptcy can be emotionally challenging. It's crucial to have a strong support system. Discussing finances and emotions with trusted individuals is encouraged. Understanding the emotional toll is vital in making informed decisions.

12. What alternatives to bankruptcy exist?

Consumer Proposals are a common alternative to bankruptcy, chosen by over 80% of insolvent Canadians. Exploring debt repayment plans and consulting a Licensed Insolvency Trustee helps identify alternatives tailored to individual financial situation

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Related blogs:

Filing for Bankruptcy in Alberta: What You Need to Know
The Pros and Cons of Filing  Bankruptcy in Canada 
Is Bankruptcy Right For Me?
What to know about filing for Bankruptcy with no assets 
Navigating the Bankruptcy Process in Canada with a Bankruptcy Trustee
Consumer Proposal vs. Bankruptcy: What's the Difference?


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