Recently in — Medical Bills

Bankruptcy for Rural/Metro Ambulance Service

Rural/Metro Ambulance Service has filed for bankruptcy.  The company provides ambulance and firefighting services to about 700 communities in 21 states, including Knox County.  The company was founded 65 years ago when a man purchased a fire truck to help his community after his neighbor’s home burned down.

The company listed over $500 million each in assets and debts.  The bankruptcy was prompted in part by the company missing a July 15 interest payment and a downgrade by Standard & Poor.  Under the proposed restructuring plan, secured lenders will provide $75 million in new financing to the company to assist through the bankruptcy process.  Upon emerging from Chapter 11, bondholders will provide an additional $135 million in new equity financing.

Senior unsecured creditors currently owed over $300 million will have the debt canceled but will then hold all of the reorganized company’s equity.  The plan also seeks to cut interest expenses in half.  ”This agreement is good news for Rural/Metro and for the clients and communities we serve. We have a solution that keeps our operations moving forward while cutting our debt in half,” Chief Executive Scott Bartos said.

Operations in Knox County will continue as usual while the company goes through bankruptcy.  East Tennessee Division Manager Rob Webb said in a statement that “Rural/Metro will continue to meet all of our contractual obligations, including maintaining excellent medical and fire protection services to the citizens we serve here.”


Can My Debt Be Discharged?

The list of dischargeable vs. nondischargeable debts can be lengthy and complex.  Here are a couple of examples of debts you will need to discuss with your lawyer about how to handle.

Court Costs

Sometimes your resolution of a criminal charge involves paying certain costs back to the court.  Or, you have been through a civil matter such as a divorce and you receive a bill for court costs.  Court costs are not dischargeable in bankruptcy. You will still be responsible for paying these, even if you receive a discharge on other debts that you list in your bankruptcy petition.

Automobile Accidents

Having an accident while driving uninsured or underinsured can result in huge bills.  Debts incurred as a result of driving drunk are not dischargeable.  Likewise, debts incurred while you were acting willfully and maliciously are not discharegeable, and some creditors may argue that certain auto accidents fall into this category.  Generally, though,  property damage and even many medical bills resulting from an auto accident can be discharged.

Just because you believe in advance that a debt will not be discharged, you must still disclose ALL of your debts to your attorney.  Don’t try to categorize or “diagnose” your debt situation on your own.  Leaving information out, even if you think it’s not important, can have serious consequences.  Your attorney will know how to handle each debt that you tell her about.


Medical Bills and Bankruptcy

Many people are aware of the financial strain of medical bills.  Some may even cite their medical bills as their primary reason for seeking a bankruptcy attorney.  But were you aware that doctors are also facing bankruptcy in increasing numbers?

An article published by CNN Money today highlights an alarming trend of doctor’s offices and medical practices seeking bankruptcy protection.   Some of the reasons cited are the decrease in elective medical procedures, patients cutting back on office visits, the rising cost of malpractice insurance, and the decrease in insurance reimbursements.  Even “top-notch” doctors with thriving practices can be affected.  After all, a medical office must balance books like any other business.

The article also points out that when a medical office struggles or even closes, it can become hard for patients to get the care they need.  Patients must travel to different geographic areas and seek to replace a doctor-patient relationship that may have existed for years.


Bankruptcy Filings and Obamacare

While I can’t say for certain how many bankruptcies are the direct result of unmanageable medical bills, I can tell you that it is one of the number one reasons an individual or couple is forced to file bankruptcy.  Often, it is a combination of unfortunate circumstances such as job loss or divorce.  Job loss can lead to loss of coverage, loss of coverage can lead to mounting medical debt, and the dominos continue to fall.

Politics aside, I think we can all agree that the intent of Obamacare is to provide more individuals and families with health insurance coverage.  The provisions of the Affordable Care Act already in place include covering children up to age 26 on their parents’ insurance plan and preventing denial of coverage for pre-existing conditions.  The provisions of the ACA scheduled to be implemented through 2014 include a cap on out-of pocket expenses, subsidies for those who cannot afford to purchase insurance otherwise, and an expansion of Medicaid.

With this expansion of coverage, will fewer people face the challenge of paying uncovered medical expenses?  Will this bring about a decrease in my business?  A 2011 study published in the American Journal of Medicine examined bankruptcy data from Massachusetts following healthcare reform in 2008.  The authors determined that medical bills contributed to almost 53% of bankruptcies in that state, only a slight decrease.

Some employers who must now cover the cost of providing insurance (or pay a penalty for not doing so) will reduce their workforce.  Will the financial challenges of these newly unemployed individuals lead to an increase in the number of calls to bankruptcy attorneys?

Generally, bankruptcy filings in the district that includes Tennessee fell about 12% in the last year.  Nationwide, the decrease was around 14%.  Whether the provisions of the ACA contributed to the decrease, and what the future effects will be, are questions that remain to be answered.