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Ask Dave

My Medical Bills Are Out of Control. Do I Declare Bankruptcy?

Jessie has $90,000 in medical bills. He had no insurance and had his gall bladder removed. He's not working and is going to school. His mom is advising him to file bankruptcy.

QUESTION: Jessie in Los Angeles has $90,000 in medical bills. He had no insurance and had his gall bladder removed. He’s not working and is going to school. His mom is advising him to file bankruptcy. Dave says he doesn’t have anything to take.

ANSWER: So you figured out for the future health insurance is important? Because it’ll bankrupt you if you don’t. That’s what you’re facing.

The deal is this. There’s nothing you can do because you can’t pay $90,000 when you don’t have a job. So just don’t pay them. That was insight. There’s no point in bankruptcy. There’s nothing they can get from you. You don’t have anything. What are they going to do? Yell at you? What are they going to do?

You don’t have anything to take. Bankruptcy would be to protect something. You don’t have anything to take. They already took your gallbladder. You don’t have anything else.

Here’s what’s going to happen, dude. You’re going to come out and get your job in computer science, and you’re going to be making $50,000 or $60,000 a year. Then we’re going to start calling these people up, and we’re going to settle $90,000 for 20 cents on the dollar by negotiating. So $18,000 or $20,000 to settle this, which is nothing as soon as you start making some money. In the meantime, there’s nothing for them to do. All they could do is sue you. Whoopee. Sue me. What are they going to do? Take your shoes? You don’t have anything. You’re what we call judgment proof, meaning they can take a judgment, but there’s nothing to get. That’s kind of a good place to be for right now in the middle of this mess. Then as quick as you get a job, the first goal here is stay in Mom’s basement and pile up $30,000 in cash and solve this mess.

Bankruptcy is an option, but there’s no point in it. It doesn’t serve any purpose. Your situation is not permanent. If you told me you make $20,000 a year and you’ve made $20,000 a year for 30 years, and you’re never going to make any more than that because you don’t have the I.Q. to ever do any better, you’re stuck, and you owe $90,000, you might be bankrupt then. But that’s not your case. This is a temporary situation because all of a sudden, your income is going to go from $0 to $60,000. When it does, you can solve the problem pretty quick. So there’s not a lot they can do. Just tell them you’re broke, living in your mom’s basement, and you don’t have any money. And you don’t work. You can’t pay them today, and you’ll pay them when you get a job when you get out of school.

You do need to get a part-time job. Four years to graduate is a long track. You need to get some money coming in the meantime.

The moral of Jessie’s story is get health insurance! It’s not that expensive—$50 a month for most of you. I don’t care about your teeth, your hair, or all that stuff. Just get major medical. If you get your gallbladder removed, it’s not $90,000. That way, it’s $5,000 and you could do that because all you’ve got to pay is the deductible and the co-pays. Carry a big deductible. The point is not the little $5,000 that’ll kill you. It’s the $90,000 things that kill you. Stuff happens. That’s why we have health insurance. Insurance is not to cover you for the little stuff. It’s to cover for the things that will break you—the big stuff. It’s that little, “I had twins and they spent six weeks in the NICU.” Welcome to $1 million—that kind of stuff. That’s the stuff that bankrupts you. You’ve got to have insurance for that stuff.