• Crushing hospital debt forces many people into bankruptcy.cottage hospital image by Chris Bolton from Fotolia.com
  
  Medical treatment in hospitals can lead to a mountain of debt--even for people who have health insurance. U.S. Health and Human Services Secretary Kathleen Sebelius told CBS News in 2009 that many people with health insurance have inadequate coverage, giving rise to increasing out-of-pocket expenses. Some hospital accounts end up in the hands of debt collectors after people fail to pay because, they say, they simply don't have the money.
  
  

Bankruptcy

• Hospital debt is unsecured debt and is treated by the law the same as credit card debt. That means the debt can be discharged through Chapter 7 or discharged or modified through Chapter 13 bankruptcy. Chapter 7 is the fastest, allowing the debt to be eliminated in about four months. However, there are are state-by-state income limits on applying for Chapter 7, and only those with modest incomes will qualify. Chapter 13 is for those with higher incomes and requires a five-year repayment history, based on your income and living expenses. After the repayment period the remaining hospital debt will be forgiven. The Washington Post, citing a study by the American Journal of Medicine, reported that 62 percent of all bankruptcies in 2007 were tied to medical and hospital debt. That marked a 20 percent rise from 2001. Three-quarters of the 2007 bankruptcy filers were people who had medical insurance at the time they incurred the debt, the Post reported.
  
  

Small Claims Court

• Hospital debt collectors are allowed to file lawsuits against you in small claims court, with a high probability of winning a judgment if the debt is legal and valid. After winning a judgment the debt collector can pursue a court order allowing garnishment of your wages or bank account. However, you have the right to explain your financial situation to the judge, who can order you and the debt collector into mediation to work out a payment plan based on your income and expenses.
  
  

Settlement

• Before going to court some hospital debt collectors will offer to settle for less than the full amount owed--a process called debt settlement. Repayment plans are also possible before the filing of a lawsuit.
  
  

Credit Scores

• Unpaid hospital debt also damages people's credit scores. A collector is authorized to report your unpaid debt to credit reporting agencies after a period of unsuccessfully seeking repayment. The result is a diminished credit score that limits your ability to use credit.