Filing Bankruptcy on Medical Debt in Canada
Canada is not often associated with mounting medical bills, but many people do struggle to cover the cost of healthcare.
If you’re in trouble, you might be thinking about whether to file bankruptcy for medical expenses.
This guide provides important information and useful advice.
It’s much more common to think about the US than Canada when somebody mentions the term ‘medical bankruptcy.’
In truth, medical expenses are higher in the US, but that doesn’t mean that healthcare is affordable for all Canadians.
While many people have access to free services provided by community providers and hospitals, there are additional fees to bear in mind.
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Research suggests that the average annual cost of healthcare for a Canadian adult has risen by over 50% in the last 20 years to over $4,640.
Almost 20% of insolvencies mention medical costs or expenses.
The most common reasons for filing bankruptcy for medical expenses
When you think about healthcare costs, you might automatically conjure up images of bills for procedures or treatments or hospital stays.
The most common issue people in Canada face is actually a loss of income that stems from illness or injury.
If you have a health condition, or you’ve been sidelined by an injury, which prevents you from working, you could stand to lose a substantial amount of money.
In most cases, employment benefits will only cover a portion of lost income, and unless you have an employer that is willing to add to your sick pay, your monthly salary could drop by hundreds, maybe even thousands of dollars.
As well as taking time off to recover from an illness or an accident, individuals might also experience financial difficulties if they have to take time off work to care for a family member, for example, a partner, an elderly parent or a child.
Another cost to consider is medication and equipment that may be required to treat symptoms or to make life easier if you have restricted mobility.
Should I file bankruptcy for medical expenses?
If you can’t cover medical bills, or you’re struggling to make ends meet after taking time off work due to poor health, you might be thinking about filing for bankruptcy.
Before you make any decisions, it’s crucial to explore the options open to you and to ensure you understand what bankruptcy entails and how it will affect you and your family moving forward.
Your priority should always be your health, so try and focus on getting better if you are recovering from an illness or injury.
If you’re not working, creditors will not be able to garnish your wages, so try not to panic.
Stress can slow your progress and impact your physical health and mental wellbeing.
The next step to take is to try and manage your money.
If your cash flow is restricted, look for ways to reduce spending and cut costs.
Analyse your budget, make cutbacks and explore options that could enable you to save in the long-term.
If you’re caring for a parent, for example, and you’ve had to take time off work, see if your siblings or other family members could contribute or if there is any form of financial assistance available to help with care costs.
When you’ve reached a point where you’re falling behind with payments, you have no means of paying bills, you’ve been refused credit and you don’t think your financial situation will improve in the near future, you could consider filing a consumer proposal or explore the possibility of bankruptcy.
If you are thinking about bankruptcy, it’s important to understand how bankruptcy and medical expenses work.
Here are some facts to be aware of:
- Bankruptcy includes unsecured debts, for example, outstanding medical bills and hospital charges;
- Your income will be subject to surplus income regulations, meaning that if you do file for bankruptcy, you will need to disclose extras, such as disability or sickness benefits;
- Paying medical fees directly can lower your surplus income;
- Filing for bankruptcy will put a stop to calls from creditors.
Could a consumer proposal work for me?
A consumer proposal is often regarded as an alternative to bankruptcy.
In the case of medical expenses and healthcare costs, a consumer proposal might be a better option if you have returned to work and your income is now sufficient to trigger additional bankruptcy costs through surplus income charges.
A consumer proposal is a payment plan, which is drawn up with creditors to allow the individual to pay back what they can afford within a specified time-frame.
This option enables you to clear debts and start afresh.
If you have any questions about consumer proposals or bankruptcy, or you’re struggling to pay medical bills, we are here to help.
We have a team of experienced advisors ready and waiting to answer questions and provide information related to options that are relevant to your personal circumstances.
Statistics show that personal insolvencies are becoming more common in Canada.
In October 2019 alone, 13,200 bankruptcies and proposals were submitted.
This equates to a 13% increase from October 2018.
We are often advised to put our health first, but what happens if you can’t afford to pay healthcare costs, or you have to take months off work due to an illness or injury?
Many people are finding it difficult to pay for healthcare in Canada, and it’s common to find medical expenses included in bankruptcy and insolvency applications.
Whether you’ve taken time off and your income has dropped, or you have outstanding medical bills that you can’t pay, it’s important to understand that there are options.
We can help you weigh up the pros and cons and provide tailored recommendations based on your individual circumstances.
Bankruptcy might be a viable option, but there are often steps you can take to clear or reduce debts before resorting to this measure.
If you have any questions, or you’re worried about healthcare costs, don’t hesitate to contact us today.
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