A reader is facing a lawsuit for an old bill she thought her insurance would cover.

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I am being sued $84,000 (almost half of that is in interest) for an appendectomy that I had over 12 years ago that I never knew insurance didn’t cover.  I had moved out of state after the surgery and never had a process server or any bills at all.  Should I go bankrupt or am I not liable for this insane amount all these years later?

− Susan in New York

Steve Rhode, The Get Out of Debt Guy, replies…

Hi Susan,

You have three options. Before we break those down, know this: You’re not alone. In fact, you have a lot of company. Last year, CNBC reported that two-thirds of all bankruptcies “were tied to medical debt.”

That’s probably not much comfort, but I want to make a point: If the problem is this common, the blame falls at least partly on the system. Medical bills can be huge and insurance can be confusing.

One issue that seems to always trip up otherwise smart people: Health insurance does not eliminate your financial liability for the bill. A health provider might “accept assignment” but that just means they agree to accept the insurance payment as the full amount due.

I’ve seen it happen many times. Someone will go to the doctor or hospital and hand over insurance information – and then expect to hear back if there is an issue. Too many people wind up with giant and shocking medical bills by doing this.

In your situation, I think we can agree that there appears to be an unpaid balance. There are several issues here. The first is if all the medical providers that could bill for your visit actually did.

Admission to a hospital can involve separate bills from a surgeon, anesthesiologist, outside lab work, or more. So, I think there is a bit of digging that needs to be done to figure out exactly what the bill was for and if it was ever submitted to insurance for payment.

But a lot of time has now passed. Trying to figure out what happened 12 years ago might be difficult. Or impossible.

Since you mentioned a process server, I’m assuming you were sued over the debt, lost, and now have a judgment against you as a result. Depending on what state you live in, a judgment can survive for decades.

So, there are three things to consider:

1. Time and trouble?

Is it worth the time and investment to try and go back to figure out if everything was submitted properly after the medical issue? And what if there is a state restriction on the window to submit medical claims? This might involve the most amount of your time to deal with.

2. Hit rewind?

You could attempt to go back and unwind the judgment by making a claim you were improperly served. If so, that would terminate the court case but still leave the underlying debt to be resolved. However, you could evaluate if the debt was so old at the time they sued you that you could raise a claim that the suit is outside the statute of limitations. I would strongly suggest you hire an attorney to help represent you this since it involves specific legal issues. This could be the most expensive solution.

3. Declare bankruptcy?

You could file bankruptcy and eliminate the debt in about 90-120 days. This is probably the least expensive way to tackle this. Bankruptcy will close the door forever on the debt.

At the very least, you should talk to a bankruptcy attorney who’s licensed to practice law in the state where you live. Here are some tips on how to find a great bankruptcy attorney.

Connect with a qualified bankruptcy team so you can decide if it’s time to file.

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About the Author

Steve Rhode

Steve Rhode

Steve Rhode is better known as the “Get Out of Debt Guy.” He’s been teaching people how to solve money problems since the 1990s. He considers this to be one of his greatest moments: declaring bankruptcy.

Published by Debt.com, LLC