Should I File Bankruptcy For Medical Expenses and Health Care Obligations?

Medical bankruptcy is a phenomenon more common in the United States, but it doesn’t mean it’s unheard of in countries like Canada with free healthcare systems. It’s crucial to understand that while medical bankruptcy in Canada may not stem directly from hospital bills, it often results from other related costs and issues. In fact, 19% of insolvencies in Canada list health issues, medical costs, or injury as a primary cause of bankruptcy.

The Medical Costs Beyond the Obvious

Medical costs can encompass a wide range of expenses beyond the ones directly related to medicine and non-insured equipment. These costs can include moving expenses, household upgrades, or retirement home expenses. However, a significant medical “expense” is the loss of income during recovery from a medical condition. This loss can lead to a heavy reliance on credit to cover living and health costs while you are unable to work.

The Caregiver Conundrum

Another common scenario is taking time off work to care for family members. Adult children often become caregivers for aging parents, costing them time and income while also incurring additional expenses such as travel costs for doctor’s appointments and purchasing medical supplies. These costs can quickly pile up and cause financial strain.

Bankruptcy for Medical Bills: What You Should Know

If you find yourself in a situation where you can’t pay off your medical bills and credit cards due to a medical issue, what should you do? The initial step is to focus on your recovery. The stress of creditors calling while you’re recovering can be overwhelming. However, it’s important to note that creditors can’t garnishee your wages until you return to work.

The next step is to regain balance in your monthly cash flow. It might require downsizing your lifestyle or seeking help from family members or community resources. If you still have overwhelming debt after balancing your budget, a consumer proposal or personal bankruptcy is an option.

Can Medical Debt Be Discharged in Bankruptcy?

Unsecured debts, including hospital fees and other unpaid medical bills, are included in bankruptcy. While bankrupt, any income received is subject to surplus income rules. Therefore, if you are receiving sick benefits or disability income, that’s part of your income. Bankruptcy provides an automatic stay of proceedings that stops creditor actions if you’re receiving collection calls for unpaid medical bills.

How Can a Consumer Proposal Eliminate Medical Bills?

If you’ve returned to work and your income has returned to pre-illness levels, you might find your income high enough to trigger extra payments in bankruptcy – known as surplus income. In this case, a consumer proposal is an alternative to bankruptcy. It’s a repayment plan arranged with all your unsecured creditors to repay what you can afford.

The End Goal

The ultimate objective is to receive a financial fresh start. If you have accumulated significant debts due to medical expenses or time off work, and eliminating those debts will help you balance your budget, then either bankruptcy or a proposal may be worth considering.

Seeking Professional Advice

If you are uncertain as to whether bankruptcy is the right option for you but are struggling with debts related to medical costs, it’s advisable to seek professional advice. A no-obligation consultation can explain all your options so you can make an informed decision.


Deciding whether to file for bankruptcy due to medical expenses and health care obligations is a significant decision that should not be taken lightly. It’s crucial to understand all the implications and alternatives before making this decision.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.