Many people face major problems if they have unpaid medical expenses. These expenses can become a threat to your home, savings, or income. Without any health insurance, an extended hospital stay can turn into a financial sum of tens of thousands or even hundreds of thousands of dollars. If a reasonable payment plan is not initiated before treatment begins, unpaid bills will become a significant collection action shortly after the treatment period ends. Depending on the state you live in, your home, savings, or other personal property may be attached to make up for unpaid medical bills.

Even if you have insurance, the financial risk of copays, large deductibles, and uncovered treatment can be significant. There are instances where out-of-network physicians are recruited during any procedure without the patient’s knowledge or approval. Some policies cover only a small portion of these charges. Although the Affordable Care Act requires insurers to pay these charges, there have been cases where parts of what should have been covered were not covered.

What if you get medical treatment that costs tens or hundreds of thousands of dollars and your insurer denies the claim because of an uncovered deductible, copayment, out-of-network doctor, or unapproved treatment or drug? Who pays the doctor and the hospital? If there is no insurance or the amount is limited, your doctor, hospital or other medical facility will force you to guarantee full payment of the billed costs, less any amount actually reimbursed by your insurer. Any amount that your insurance company does not pay will be the responsibility of the patient.

What happens when a patient cannot pay?

What Happens When You Can’t Pay A Big Medical Bill? Typically, the result is a lawsuit filed by the hospital or a collection agency with a judgment and bond filed against the home and the patient’s accounts. In most states, a portion of the debtor’s earned income can be garnished. Many times before reaching this point, the patient files for personal bankruptcy to stop wage garnishment and eliminate medical bills and other debts. This requires losing all assets, including savings, real estate, and real estate equity. Some of these assets that are exempt in bankruptcy will be turned over to the court and divided among the creditors.

How patients are protected against these events

Family savings trust

Protecting assets with a purpose-built family savings trust can often protect savings from these events. A family savings trust is exceptionally flexible in form and can incorporate provisions that combine the features of many national agreements in the language of the plan documents. All of your assets may be held in the trust, but managed under special terms appropriate to that asset.

For those concerned with protection against unforeseen medical bills, a trust can be customized to specifically address the problem of medical expenses. The trust can be planned to maintain your home, savings, and brokerage accounts in order to protect these assets from unexpected medical expenses. It is often designed to safeguard the tax benefits associated with housing (including deducting mortgage interest, property taxes, and avoiding profit on a future sale), while carrying out proper estate planning and asset protection objectives to the family patrimony.