Protecting Assets From Medical Bills in Florida

We had married clients recently who suffered from catastrophic medical debt. Several years ago the wife was admitted to a hospital to treat a rare medical condition. The husband and wife had an medical insurance policy offered under the Affordable Care Act. The wife eventually recovered, but the hospital bill was over $250,000. The clients discovered that insurance covered only a minority portion of the bill.

The wife’s treatment of this unusually disease included some experimental, expensive drugs and procedures. The insurance company denied coverage of some of these experimental treatments even through they were an essential part of the cure. The wife filed appeals with the insurance company; the appeals were immediately denied, and the clients could not financially afford suing the insurance company over the payment denial. Additionally, the wife’s medical treatment required intervention of medical specialist who were not part of the the insurance company medical panel; their fees were not covered because they were “out-of-network.” The client faced an unpaid medical bill of approximately $100,000 including a deductible, denied coverage, and out-of-network providers.

The hospital sent billing statements for several months after the wife returned home, but the bills eventually stopped. The hospital did not write off the debt. It sold the medical debt at a discount to a collection company. This past month, years after the wife’s hospitalization, the collection company filed a lawsuit against both of my clients for the full amount of the unpaid medical bill. The lawsuit names the client and spouse jointly as defendants because both spouses guaranteed payment of the hospital bill when they both signed paperwork during the hospital admission process.

This true story illustrates the danger of unforseen medical debt. People with insurance are only partially immune from medical catastrophe,. It is a well-known fact that medial debt is the leading cause of consumer bankruptcy in this country. Risk management and asset protection planning can minimize risk of unexpected medical judgments.

A patient being admitted to a hospital is confronted with a large amount of paperwork. Included in the paperwork is a guarantee of paymentof the hospital bill not covered by insurance. The patient and family member does not have much time to review hospital admission papers before signing. In an emergency situation, there is pressure to sign quickly all hospital documents.

If insurance does not cover the full hospital bill then the hospital can seek a recovery, and pursue a money judgment, against either or both spouses who signed paperwork including the guarantee of payment. The spouse who is admitted to the hospital must sign all paperwork, but the non-admitted spouse is not required to sign. A spouse who did not sign a payment guarantee cannot be sued for payment.

Most spouses in Florida own their assets jointly with rights of survivorship. Joint marital assets under Florida law are presumed to be owned as “tenants by entirety” ( TE or T by E). All T by E property in Florida is protected from the creditors of either individual spouse although the same asset is vulnerable to joint creditors. In the client’s case, if only the admitted wife had guaranteed payment of the hospital bill then all of the couple’s jointly owned financial assets would be exempt from the judgment in favor of the hospital or the assignee debt collector.

In this case, the collection agency judgment could result in a garnishment of all the couple’s financial accounts because the husband co-signed a guarantee of the hospital bill. If he had not signed a guarantee of the bill then all of the couples’ jointly owned T by E accounts would have been exempt from a money judgment against the admitted wife only.

A judgment creditor will consider garnishment of the debtor’s wages if the debtor is employed. In this particular example, the admitted wife had quit work because of her medical condition. The husband was still employed and supported the family. An employee compensated by salary, wages, or commissions is considered to be “head of household” under Florida law if he financially supports a member of h is family. The joint judgment creditor could not garnish the husband’s earnings because he is head of household.

My clients own their primary residence with no mortgage. The home is protected under Florida’s unlimited homestead protection even if both spouses are judgment creditors. Homestead protection applies regardless of whether the house is owned jointly or in the name of just one spouse.

The couples have two cars. The husband’s car is leased and the wife’s car is financed. A leased car is not a judgment risk because the debtor does not own the asset. Judgment creditors typically do not pursue financed cars because their judgment lien is secondary to the lien placed on the car by the car finance company.

This story teaches important principals of Florida asset protection. These clients illustrate the risk and consequence of catastrophic medical treatments and the limits of medical insurance. The case demonstrates the importance of avoiding a joint guarantee of medical debt and the importance of reviewing and understanding medical paperwork that people sign before getting medical treatment. Lastly, it shows how Florida asset protection laws protect an admitted patient requiring expensive treatment as long as the non admitted spouse does not guarantee payment.