Once you’ve decided to file for bankruptcy to ease the overwhelming medical debt, consider how best to protect yourself going forward. Unless you take steps to prevent this debt from recurring, you could end up in medical debt again without having to file for bankruptcy again. Protecting yourself from future medical debt should be one of your first concerns when filing for Chapter 7 or Chapter 13 bankruptcy. Individuals who have gone bankrupt due to devastating medical expenses have learned the hard way that their medical insurance was inadequate and did not fully protect them from financial disaster. Most people are insured through an employer-provided health plan. These plans usually only cover a small percentage of the costs incurred after a catastrophic illness or emergency. Some people buy their own health plans. These persons are usually self-employed. Individualized health care is very expensive and these plans also have limitations. Still, there are options a person can take to supplement their health insurance, minimizing the risk of being overwhelmed by medical debt again.
Adjusting health insurance can be a helpful tactic. Individuals who purchase their own health insurance have the advantage of being able to tailor their insurance plan to their individual needs. They can adjust their deductible and coverage to suit their specific health situation. While employer-provided health insurance is usually less expensive, there is less opportunity to tailor this plan to their individual needs. An option that some employers offer is providing an allowance in lieu of health insurance. This allows an employee to shop for a more personalized insurance plan.
Catastrophic coverage is another option an individual can take to protect themselves against future medical liabilities. Catastrophic medical coverage is less expensive and can be helpful in improving one’s health plan by covering only medical emergencies.
A Health Savings Account (HSA) can be a useful tool for managing medical debt. It is a tax-advantaged medical savings account available to taxpayers enrolled in a high-deductible health plan. The funds contributed to an HSA are not subject to federal income tax at the time of deposit. These funds roll over and accumulate from year to year if left unspent. This approach allows the individual to set aside a certain amount each month for their HSA. These funds can be used to pay deductibles and other health care costs not covered by their health plan. A Flexible Spending Account (FSA) is another tool employers offer to help employees manage health care costs, but FSAs have significant drawbacks.
These are some examples individuals can consider when optimizing their health insurance plan to protect them and their loved ones from medical debt and the threat of bankruptcy. There are many other concerns that a person should consider when planning for a medical emergency, such as loss of income. Medical emergencies are very unpredictable and no one is immune to the possibilities of a medical crisis. It’s a good idea to plan ahead for the financial impact of a potential healthcare crisis.
D. Dye
File bankruptcy due to overwhelming health
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