My Patient Filed Bankruptcy – Now What?

So, you’ve been bleeding revenue because some of your patients haven’t paid their medical bills months after receiving your service. Then you get notified that they have declared bankruptcy, and you’re wondering if you would still get paid. Heck, what do you do when patients file for bankruptcy? Well, as a healthcare provider, the first thing you must do when you get a notice of bankruptcy from a patient is, Cease All Debt Collection Attempts! Don’t worry. You can still recover the unpaid balance.

Can You Still Get Paid When Patients Declare Bankruptcy?

Yes, you can still get paid when your patient files for bankruptcy. But, it won’t be by contacting the patient to demand the debt they owe you. In fact, if you attempt to badger them for the unpaid balance after they have declared bankruptcy, you’d be violating a federal court order. And, the violation can cost you thousands of dollars in attorney and court fees or other punitive damages. Therefore, immediately forward the notice of bankruptcy you received to your first and third party collection agency. You must ensure that you and anyone you contracted with to contact patients for medical bill balances stop contacting using ANY method, online and traditional.

Types of Bankruptcy & How It Affects You

The type of bankruptcy your patient files can determine your chances of getting paid their unpaid balances. Generally, individuals file one of either two types of bankruptcies.

1.      Liquidation Bankruptcy

Also known as Chapter 7 bankruptcy, this is the worst kind of bankruptcy for the patient, and your chance of getting paid is slimmer. It could mean they get to walk away free from all unsecured debts such as medical bills and credit card debts. If the patient has nonexempt assets, they’d be sold off to offset some of the debts they owe creditors, like yourself. However, creditors will get no payments when there’s nothing to sell after the patient files for liquidation bankruptcy.  Fortunately, not everyone qualifies for liquidation bankruptcy. Only people who have little or no disposable income and assets can file for this type of bankruptcy.

2.     Reorganization Bankruptcy

More popularly referred to as Chapter 13 bankruptcy, this bankruptcy can be filed by individuals with regular income. In this type of bankruptcy, individuals are allowed to pay their debts through a repayment plan that wouldn’t cripple their finances. The repayment plan can be spread from three to five years, depending on the debt owed and the individual’s income. Depending on your claim and the terms of the repayment plan, you may never receive payment if you do not formally file a proof of the balance owed. Read on to learn how to file a creditor’s claim. 

How to Get Paid When Patients Declare Bankruptcy

In both types of bankruptcies, you can still get paid, although your chances are more unlikely with a Chapter 7 bankruptcy. Whichever the case, to recover an unpaid medical balance from a patient who declared bankruptcy, you’d need to file for Proof of Claim. One of the forms a patient completes during his/her bankruptcy filing is a schedule of balances owed. Your balance may be classified incorrectly or list an incorrect balance. A creditor’s claim provides proof and an accurate statement of the balance owed.  

What Is Proof of Claim and How Do You File for One?

A Proof of Claim is a document that informs the bankruptcy court of the debt the patient owes you, and your claim to receive a payment from whatever assets are sold off. Many creditors fail to file a Proof of Claim after an individual files for bankruptcy. By opting to file a claim with the court system, your balance will be on record as a balance owed. The process of filing a Proof of Claim is easy and here is how to do it:

  • First, log onto the U.S. Court website and download the bankruptcy official form B410.
  • Then complete the form and file your claim within the stipulated timeframe.
  • Confirm your claim is filed by viewing your filed claim using the court’s PACER system

After you’ve done this, you’ll begin to receive notifications regarding the bankruptcy case. A case can take a matter of months or years.  

It goes without saying: you should obtain the counsel of your attorney especially if unfamiliar with the process.

In Conclusion

You can still recover unpaid medical debts from patients who file for bankruptcy. All you have to do is stop contacting them and file a Proof of Claim with the U.S. Court. The bankruptcy law dictates the order in which claims are paid, typically secured debts then priority debts and finally unsecured debts.

However, you can avoid this situation by putting in measures to ensure patients pay their medical bills on time. One of the most effective ways is to communicate with the patient and figure out a plan that works for you both. If resources are stretched thin for consistent outgoing collections, which they often are, enlist the help of a first party collections specialist as an adjunct after your billing activities but before turnover to a bad debt collection agency. Additional time spent in outreach to your patients can ensure unpaid balances are collected promptly or entered into a satisfactory repayment plan while also maintaining a quality patient billing experience.  

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