By Ruth Wood, MBA, CPHRM
Bankruptcy creates challenges for patients and physicians alike. When a patient files bankruptcy, physicians must manage unpaid balances while maintaining professional care. Supporting patients with empathy while protecting practice stability requires a careful approach.
Understand the Rules
A bankruptcy filing triggers an “automatic stay,” which bars creditors—including physicians—from direct collection efforts. Unpaid balances must be addressed through the court system. Contacting patients to seek repayment can lead to penalties.
In addition, physicians must comply with the Fair Debt Collection Practices Act (FDCPA) which prohibits harassment, misleading statements or unfair collection tactics. Even routine billing communication should be handled carefully once a patient has filed for bankruptcy.
As a refresher, the outcome of bankruptcy will differ depending on the type filed by the patient:
- Chapter 7 often wipes out debts entirely.
- Chapter 13 sets up a repayment plan, which may provide you with partial recovery.
File a Proof of Claim
If you’re notified that a patient has filed for bankruptcy, you’ll receive instructions from the court. Filing a “proof of claim” documents the debt and ensures your practice is considered for repayment. Deadlines are strict—missing them eliminates your chance of recovery. Engage billing staff or legal counsel to file correctly and on time.
Maintain Professional Care
Financial strain should not compromise clinical treatment. Unless there are valid reasons to end your relationship with the patient, continue providing care. If you decide to discontinue non-emergency services, follow state and federal rules, including proper notice and referrals.
Acknowledging the patient’s hardship without judgment can preserve trust. Professionalism during bankruptcy reinforces both patient well-being and your reputation.
Strengthen Practice Policies
Bankruptcy highlights the importance of clear financial practices. Always be sure to:
- Collect copays and deductibles at the time of service
- Offer structured payment options for hardship cases
- Train staff to discuss billing with clarity and compassion
These measures help prevent balances from becoming uncollectible.
Balance Care and Stability
Patient bankruptcy forces physicians to balance compassion with financial responsibility. By adhering to court rules, maintaining professionalism and reinforcing financial policies, practices can manage these cases effectively and ethically.
MagMutual provides expert resources and guidance to help healthcare professionals navigate these challenges with confidence. Explore more strategies for avoiding collection pitfalls with patient bankruptcies here or visit our full library of Healthcare Insights for additional support.
Disclaimer: The information provided in this article does not constitute legal, medical or any other professional advice. No attorney-client relationship is created and you should not act or refrain from acting on the basis of any content included in this article without seeking legal or other professional advice.
