Handling Medical Bills in Patient Bankruptcy
If you just received a notice that your patient has filed for personal bankruptcy, you’re probably wondering who is going to pay the bill. The short answer is that it depends on which chapter of personal bankruptcy has been filed and whether you take the necessary steps to file a proof of claim in a timely manner.
What follows is a brief primer on patient bankruptcy, and what you can do to recover outstanding bills.
Do Not Call the Patient
Upon receiving a notice that your patient has filed for bankruptcy, you must end all collection attempts for bills incurred before the bankruptcy filing date. Any attempt to collect a discharged bill would put you in violation of the court order that the patient received when they filed. Personal bankruptcy is a federally governed process and this point is very important. Recovering money must be done through the proper channels. Not only will it not help to call the patient, you can face punitive damages in the thousands of dollars. Even terminating the patient-physician relationship for nonpayment can be seen as an attempt to collect on the debt, and attempts to collect could result in court costs, attorney fees and punitive damages.
This is the most common chapter of personal bankruptcy, about 70 to 75% of all filings. A chapter 7 is known as a liquidation bankruptcy. People who file a chapter 7 have little if any assets and in turn you will likely receive very little money. The only money that is available for creditor payment is drawn from the debtor’s assets that can be seized and sold by the courts.
Despite the lower rate of recovery, it’s worthwhile to consider filing a proof of claim because assets may later be identified by the court which were not previously disclosed by a patient. In that case, money could be dispersed at a later date.
Since a primary residence and car often are exempted from seizure, there is usually little money available for credit payment. However, your patient’s insurance company is not covered in the settlement and you can attempt to recover any monies owed to you by the patient’s insurance company.
Patients with regular income may choose to file Chapter 13 bankruptcy, also known as a min-reorg. This option allows patients to create a repayment plan for their creditors over three to five years. The debtor’s payments are made to a trustee, who then distributes them to creditors.
In the case of a Chapter 13 bankruptcy, you may have a better chance of recovering funds because the court tries to treat every creditor equally. Once your patient is in a repayment plan, your medical bills will be included with others in that plan. Just like with a chapter 7, you must file a claim with the court within 120 days of the bankruptcy filing by the patient.
Worth the Time and Effort?
There is one main question to ask when deciding whether to file a proof of claim, is the amount due by the patient worth the effort. In many cases the answer is yes. However, the work necessary to file the proof of claim properly and following up on the payment plan can be time consuming. For this reason, many doctor’s offices choose to refer their patient bankruptcy cases to an attorney with bankruptcy experience.
The Best Strategy is Proactive
The best course of action in the case of medical bankruptcies is to create strategies that will help you get paid from patients in the future. At the first sign of difficulty paying, try to put your patient on a payment plan, and try to collect payments as soon as possible after treatments. If you follow a proactive collection strategy for all of your patients, you can help reduce potential losses from patient bankruptcies.