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									     BANKRUPTCY AND PATIENT
  COLLECTIONS IN A SICK ECONOMY




                                                      April 23, 2009




    ASHEVILLE                GREENVILLE                     NEW BERN                    RALEIGH                WILMINGTON
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                                                       www.wardandsmith.com
      BANKRUPTCY AND PATIENT COLLECTIONS IN A SICK ECONOMY
                             By J. Michael Fields
                             Ward and Smith, P.A.

                                      Index

I.   PATIENT COLLECTIONS

     A.   PRIVATE PAY - ADULTS

     B.   PRIVATE PAY - MINORS

     C.   DOCTRINE OF NECESSITIES

          1.   Spouses

          2.   Parents

     D.   SMALL CLAIMS

     E.   MEDICAL LIENS IN PERSONAL INJURY AND WORKERS'
          COMPENSATION CASE

     F.   ESTATES

     G.   WRONGFUL DEATH CLAIMS

     H.   TERMINATING THE PHYSICIAN-PATIENT RELATIONSHIP FOR
          NONPAYMENT

     I.   ARBITRATION

     J.   PROMPT-PAY DISCOUNTS

     K.   NORTH CAROLINA'S FAIR DEBT COLLECTIONS PRACTICES LAW

          1.   Threats and Coercion

          2.   Harassment

          3.   Unreasonable Publication

          4.   Deceptive Representation

          5.   Unconscionable Means
                               Index (cont.)



II.   NAVIGATING A PATIENT'S BANKRUPTCY

      A.   CHAPTERS 7 AND 13 - INTRODUCTION

      B.   COMMENCEMENT OF A BANKRUPTCY CASE

      C.   BANKRUPTCY NOTICE

      D.   FIRST MEETING OF CREDITORS

      E.   AUTOMATIC STAY

      F.   CHAPTER 7

      G.   CHAPTER 13

      H.   CO-DEBTOR STAY

      I.   DISCHARGE

      J.   CONVERSION OR DISMISSAL

      K.   BANKRUPTCY PROOFS OF CLAIM

      L.   DOCTRINE OF NECESSITIES

           1.   CHAPTER 7 IMPLICATIONS

           2.   CHAPTER 13 IMPLICATIONS

      M.   INSURANCE CLAIMS

      N.   TERMINATING THE PHYSICIAN-PATIENT RELATIONSHIP




                                     ii
         BANKRUPTCY AND PATIENT COLLECTIONS IN A SICK ECONOMY
                                            By J. Michael Fields
                                            Ward and Smith, P.A.1



I.      PATIENT COLLECTIONS
        A.       PRIVATE PAY - ADULTS

                 In general, an adult is responsible for the ordinary, reasonable and customary
                 charges for medical services provided to him or her. If the patient agrees in
                 advance to a particular charge for a service, then the patient is responsible for that
                 charge.

        B.       PRIVATE PAY - MINORS

                 A minor (i.e., person under the age of 18) is responsible for the ordinary,
                 reasonable and customary charges (or agreed-upon charges) for medically
                 necessary services provided to the minor only if the services are provided either
                 based upon the minor's credit or at the request of the minor.

        C.       DOCTRINE OF NECESSITIES

                 1.       Spouses

                 Under certain circumstances, a medical practice can recover from a patient's
                 spouse for the value of the medical services provided to a patient, even if the
                 spouse did not sign anything as a guarantor or responsible party. In order to
                 recover from the patient's spouse under this so-called "doctrine of necessities" or
                 "doctrine of necessaries," the medical practice must show that (1) the medical
                 services were provided to the patient, (2) the medical services were necessary for
                 the patient's health and well-being (as opposed to being merely for cosmetic
                 purposes), (3) the patient and spouse were married to each other at the time the
                 medical services were provided, and (4) payment for the medical services has not
                 been made.

                 If the patient and spouse were married but separated at the time the medical
                 services were furnished, the spouse nonetheless is liable if the medical practice
                 was not aware of the separation.

                 The medical practice is not required to exhaust its collection remedies against the
                 patient (or the patient's estate, if the patient is deceased) before pursuing the
                 spouse.

1
 The information contained in this manuscript is not intended to serve as legal advice. This article is intended for
educational purposes only and is not intended to be an exhaustive treatment of the subject matter. You should assess
your specific rights and obligations with your legal counsel.

                                                         1
     Even though the doctrine of necessities does not apply to cosmetic procedures, a
     spouse by contract may expressly agree to pay for such services.

     On March 26, 2009, Senator Katie Dorsett (D - Guilford) introduced in the North
     Carolina General Assembly a bill (S1031) which, if enacted into law, would limit
     the scope of the doctrine of necessities. The bill provides that a health care
     provider seeking to recover from a widow or widower of a deceased patient under
     the doctrine of necessities shall be limited in its recovery to an amount not
     exceeding the amount that would have been reimbursable under Medicare or
     Medicaid, whichever is greater.

     2.     Parents
     Both the father and the mother, whether by blood or by adoption, are responsible
     for the ordinary, reasonable and customary charges for medically necessary
     services provided to their minor child.

     A medical practice is not bound by any separation agreement, divorce decree, or
     child support order as to who between the father and mother is responsible for the
     minor child's medical bills. The medical practice may pursue the father or
     mother, or both, for collection.

     A parent is not responsible for charges for services provided to the minor child
     after there has been a court order terminating all parental rights.

     Upon marriage, a minor is emancipated by operation of law. In addition, a minor
     at least 16 years of age can petition the court for a judicial decree of
     emancipation. The minor's parents are not responsible for charges for medical
     services provided to the minor child after the minor has become emancipated.

     A parent may by contract expressly agree to pay for services, medically necessary
     or cosmetic, provided to a minor child after the minor has become emancipated.

D.   SMALL CLAIMS

     Small claims courts exist in all 100 counties in North Carolina. The amount in
     controversy may not exceed $5,000.00. A medical practice may sue on a debt on
     which the balance is more than $5,000.00, but the amount sought cannot exceed
     $5,000.00. A magistrate judge decides the case, but the losing party may appeal
     to the district court.

     A medical practice must file the small claims suit in the county of the residence of
     the defendant (whether the patient or other responsible party). In most cases, the
     suit to collect on the debt must be commenced within three years from the date of
     breach (i.e. when the individual defaults on his or her obligation to pay). If the
     individual makes a partial payment, the time within which to file a lawsuit may be



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     extended where the patient intended to acknowledge his or her liability for the
     entire indebtedness and willingness eventually to pay it.

E.   MEDICAL LIENS IN PERSONAL INJURY AND WORKERS'
     COMPENSATION CASES

     A medical lien may be established in favor of a medical practice for medical
     services provided in connection with an injury for which the patient recovers.
     The lien attaches to the proceeds of any personal injury settlement or verdict in
     favor of a patient. The lien also attaches to any workers' compensation award. If
     a parent or guardian of a minor patient or incompetent patient obtains a recovery
     on behalf of the minor or incompetent, the medical lien still attaches to the
     amount recovered on the patient's behalf.

     In order to validate or "perfect" a medical lien, the medical practice must furnish,
     without charge, to the patient's attorney both (1) an "itemized statement" or
     "medical report" for use by the attorney in the negotiation, settlement, or trial of
     the personal injury claim, and (2) a written notice that the lien is claimed.

     Because of the statute's use of the terms "itemized statement" and "medical
     report," it is unclear from the statute whether the medical practice may charge for
     the provision of medical records without losing its lien rights. To be safe, the
     practice should not charge for the medical records.

     The amount of the lien is restricted by two variables. First, the medical practice
     cannot receive more than the amount owed on the unpaid bill. Second, the
     medical practice and other valid lien holders cannot receive, in the aggregate,
     more than 50% of the amount of damages recovered after the patient's attorneys'
     fees have been deducted from the recovery.

     Subject to the two restrictions set forth above, any person who receives the
     settlement or judgment proceeds must retain an amount sufficient to pay medical
     liens. The medical practice may have recourse against the entity disbursing the
     funds, if that entity has notice of the claimed medical lien. In addition, the
     medical practice may have a lien on the "proceeds" of the personal injury
     recovery. For example, if the patient receives the personal injury recovery
     without honoring the medical lien and uses that money to purchase a car or a
     certificate of deposit, the medical practice may have a lien against the car or
     certificate of deposit as "proceeds." In such a situation, if the "proceeds" from the
     personal injury recovery can be located and identified, then the medical practice
     may have recourse against that property.

     A patient's instructions to the patient's attorney for disbursement of personal
     injury recovery are not binding on the attorney to the extent that the instructions
     conflict with the requirements of the lien law. The attorney holding the settlement
     or judgment proceeds must pay the lien if it is properly perfected. An attorney



                                       3
     with notice of a medical lien claim who does not pay it in accordance with the
     statute may face liability for not honoring the medical lien.

     If the amount of the lien claim is disputed, the person responsible for distributing
     the recovery proceeds can hold the funds pending a judicial resolution or other
     negotiated settlement of the dispute regarding the lien claim.

     Despite any confidentiality agreement entered into between the patient and the
     payor of the recovery, upon the lienholder's written request and the lienholder's
     written agreement to be bound by any confidentiality agreement regarding the
     contents of the accounting, any person distributing funds to a lienholder in an
     amount less than the amount claimed by that lienholder must provide to that
     lienholder a statement showing the total amount of the recovery, the total
     attorneys' fees, the total distribution to lienholders, the amount of each lien
     claimed, and the percentage of each lien paid.

     One court case encountered a situation where a patient used the award to pay two
     medical lien claimants, but not a third. In 2003, the North Carolina Court of
     Appeals ruled (and the North Carolina Supreme Court subsequently affirmed)
     that, under the then version of the medical lien statute, the patient was not
     required to pro-rate the available funds among all lien claimants as long as the
     patient paid all of the available funds subject to perfected lien claims. As a result
     of the Court of Appeals decision, a bill was introduced in the North Carolina
     General Assembly in 2003 to reverse legislatively the effect of the court decision.
     However, as a result of certain deletions from the bill and the legislature's failure
     to clean up what was left over after those deletions, it is unclear whether a pro-
     rata distribution of funds to lien claimants presently is required.

     The medical lien laws do not require or authorize a medical practice to act
     contrary to laws pertaining to confidentiality of medical records. The medical
     practice should require a HIPAA-compliant authorization signed by the patient
     prior to releasing any medical records to the patient's attorney.

     Subject to North Carolina's fair debt collection practices law discussed in Section
     K below, the practice may continue attempting to collect payment from the
     patient and any other responsible party while the personal injury case or claim is
     pending (but not while a workers' compensation case or claim is pending).

F.   ESTATES

     Medical practices are entitled to file claims for outstanding medical charges
     against the estates of deceased patients or the estates of third-parties responsible
     for patient accounts. After a personal representative has been appointed to
     administer an estate, the representative must publish a "Notice to Creditors" in a
     newspaper located in the county in which the estate is pending. The Notice to
     Creditors must be published once a week for four consecutive weeks, and it must
     inform all creditors that claims against the estate must be presented by a certain


                                       4
     date, which date must be at least three months from the date the Notice to
     Creditors is first published.

     The personal representative also must deliver or mail a copy of the Notice to
     Creditors to any creditor of the decedent if the creditor is "actually known or can
     be reasonably ascertained by the personal representative . . . within seventy-five
     days" after the qualification of the personal representative, failing which the
     creditor is entitled to file a claim against the estate within three months of
     receiving actual notice.

     Any claim that is not presented to the personal representative within the required
     time is barred. Medical practices should have in place an effective system for
     identifying deceased patients and timely filing claims against the estate.

     A claim against an estate must be in writing, state the amount of and basis for the
     claim, and specify the name and address of the medical practice. The claim must
     be mailed by certified mail, return receipt requested, to the personal representative
     or the clerk of court of the county in which the estate is pending. If a personal
     representative rejects the claim, the medical practice must commence a lawsuit to
     enforce its claim within three months after receipt of written notice of rejection,
     failing which the claim is barred.

G.   WRONGFUL DEATH CLAIMS

     A wrongful death claim may be brought by the personal representative of a
     decedent's estate if the decedent dies as a result of injuries caused by the
     negligence of a third party. If the personal representative obtains a wrongful
     death recovery from a third party, the recovery passes outside the estate and is not
     an asset that can be used to pay the decedent's debts, except to the extent of: (1)
     burial expenses; and (2) medical expenses not to exceed the aggregate amount of
     $4,500.00, except that this amount shall not exceed 50% of the recovery after
     deducting attorneys' fees.

     The wrongful death proceeds in the hands of a third party that is liable to the
     medical practice are not exempt from the medical practice's claim. Therefore, if
     the decedent's spouse or parents are responsible for the medical practice's charges,
     whether by contract or by virtue of the doctrine of necessities, once the wrongful
     death proceeds are paid to the spouse or parent, then the proceeds may be
     available to pay the charges.

H.   TERMINATING THE PHYSICIAN-PATIENT RELATIONSHIP FOR
     NONPAYMENT

     The North Carolina Medical Board recognizes the physician’s right to choose
     patients and to terminate the professional relationship with them when the
     physician believes it is best to do so.


                                       5
     Some of the common reasons a physician terminates the physician-patient
     relationship are the patient's failure to meet financial responsibilities; a change in
     the patient's insurance coverage; the patient's noncompliance with medical
     suggestions, treatments, or therapies; drug seeking; and the physician's retirement
     or relocation.

     The Board maintains that termination of the physician-patient relationship must
     be done in compliance with the physician’s obligation to support continuity of
     care for the patient.

     The decision to terminate the relationship must be made by the physician
     personally (rather than by the practice administrator). Further, termination must
     be accompanied by appropriate written notice given by the physician to the
     patient or the patient's representative sufficiently far in advance (at least 30 days)
     to allow other medical care to be secured. A copy of such notification must be
     included in the patient's medical record. Should the physician be a member of a
     group, the notice of termination must state clearly whether the termination
     involves only the individual physician or includes other members of the group. In
     the latter case, those members of the group joining in the termination must be
     designated. The Board recommends that the notice of termination also include
     instructions for transfer of or access to the patient's medical records.

     The physician may, but is not required by the Board to, give the patient a reason
     for the termination of the relationship.

     Before terminating the physician-patient relationship, the physician should review
     both the physician's (or the practice's) contract with the patient's health plan and
     the physician's (or the practice's) malpractice insurance policy to determine if
     either places any requirements or limitations upon the physician's right to
     terminate the physician-patient relationship.

     The physician should send the written notification of termination both via regular
     first-class mail and via certified mail, return receipt requested. If the patient signs
     for the certified package, then the physician will have proof of receipt, which
     proof should be included in the patient's medical record. If the patient does not
     sign for the certified package, then the patient still should receive the notification
     via regular first-class mail.

I.   ARBITRATION

     Although arbitration is not ideal for claims that the medical practice otherwise
     would file in small claims court, it might be appropriate for larger claims.
     However, the real benefits of arbitration are seen in the context of medical
     malpractice claims against the medical practice.




                                        6
Litigation of a medical malpractice claim is expensive, both in terms of legal fees
and in terms of lost productivity associated with written discovery, depositions,
and a lengthy jury trial. Because trials are public proceedings, litigation also may
bring unwanted publicity.

Arbitration is an alternative to traditional litigation. It is a process where a neutral
third party listens to both sides of a dispute and makes a decision concerning the
dispute. Although one cannot predict how an arbitrator will rule, an arbitrator
may be more likely to make a decision based upon the facts rather than based
upon emotion as a jury might do. An arbitration provision might even discourage
a patient's attorney from pursuing a malpractice claim of questionable merit.

Arbitration can be binding or non-binding. This discussion addresses arbitration
which is binding upon the medical practice and patient. That is, the decision of
the arbitrator is final and generally may not be appealed.

There are two types of binding arbitration. One type is where the medical
practice and patient agree to binding arbitration after a malpractice claim has been
asserted. The other type of binding arbitration, discussed here, is where the
medical practice and patient agree to submit any future malpractice claim to
binding arbitration.

The arbitration provision may be a separate document. Typically, however, the
provision is incorporated into a document that addresses the patient's financial
responsibility to the medical practice.

Agreements to arbitrate future malpractice claims are enforced by North Carolina
courts if the arbitration provision is properly drafted and the medical practice
takes proper care in the signing of the document by the patient. For example, in
May of 2005, a federal district court in North Carolina upheld a binding
arbitration agreement in a wrongful death lawsuit against Duke University Health
System and affiliated entities and physicians.

The patient's agreement to arbitrate must be supported by consideration flowing
from the medical practice to the patient. An agreement by the medical practice to
be bound by the rules and outcomes of arbitration should be sufficient
consideration.

The patient reasonably should be able to understand the provision. Simple
language, not legal jargon, should be used. Although the medical practice does
not want to plant seeds in the patient's mind, the arbitration provision is more
likely to be upheld if it specifically mentions malpractice. There should be no
ambiguities or inconsistencies in the provision. The arbitration provision should
not be hidden within the document through the use of type which is smaller than
the other parts of the document.



                                   7
The arbitration provision should not be coercive. The furnishing of health care
should not be made dependent upon the patient's agreeing to arbitrate. Patients
should be given a copy of what they have signed. The provision should give the
patient a short period of time to withdraw, in writing, the patient's consent to the
arbitration provision, and should state that any such withdrawal will not affect the
rendering of medical care.

The arbitration provision should be reciprocal. It expressly should be made
applicable to collections issues, as well as malpractice claims.

The document should state that the agreement is binding and shall inure to the
benefit of the respective personal representatives, heirs, successors and assigns of
both the medical practice and patient.

An arbitration agreement may describe the number of arbitrators (for example,
one or a panel of three), how the arbitrator(s) will be selected, whether and to
what extent the parties may conduct formal discovery (for example,
interrogatories, production of documents, and depositions) prior to the arbitration
hearing, the manner in which evidence may be presented by the medical practice
and patient at the arbitration hearing (for example, documents, prepared
statements, affidavits, live testimony), and whether (and what) rules of evidence
will govern. However, addressing all of these various issues within the arbitration
agreement would increase the length and complexity of the document. Therefore,
instead of addressing all of these issues in the document, the arbitration provision
simply may provide that the arbitration process will be governed by the rules of a
particular organization or by a particular statute. For example, the provision may
provide that any arbitration will be governed by Article 45C of Chapter 1 of the
North Carolina General Statutes, entitled "Revised Uniform Arbitration Act."
The Act generally provides for the appointment of a single arbitrator and gives the
arbitrator authority to determine the procedures, based upon what the arbitrator
considers appropriate for a fair and expeditious disposition of the particular
dispute.

The agreement should be signed by the patient or someone who has authority to
sign on behalf of the patient. If the patient has any question about the arbitration
provision, the medical practice's staff should answer the question truthfully and
completely.

Each medical practice should confirm, in writing, with its malpractice insurance
carrier that a provision for binding arbitration will not adversely affect coverage.
Assuming the carrier approves the use of an arbitration provision, creating an
agreement or incorporating the provision in the patient agreement form may be a
useful strategy for reducing risk.




                                  8
J.   PROMPT-PAY DISCOUNTS

     A medical practice should not advertise or offer a prompt-pay discount at or prior
     to the time it renders the services, unless the practice's counsel has reviewed and
     approved the discount plan. The reasons for this are many. Advertising or
     offering a prompt-pay discount possibly could result in unintended violations of
     the federal anti-kickback statute, the federal False Claims Act, that portion of the
     Social Security Act giving the Office of Inspector General the authority to
     exclude a provider from the Medicare and Medicaid programs for submitting
     payment requests for charges that are "substantially in excess" of the provider's
     "usual charges," Regulation Z implementing the federal Truth in Lending Act,
     and the North Carolina Retail Installment Sales Act.

     In addition, some provider contracts with health plans contain "most favored
     nations" clauses that require a medical practice to give the insurance company the
     lowest price the practice has offered to anyone else, regardless of what the insurer
     otherwise would pay. The amount the practice can claim as a "customary charge"
     for a service might also change if the practice offers discounts to a sufficient
     number of patients.

     On the other hand, under certain circumstances a medical practice may offer a
     discount to a patient after it renders the services. The practice should use
     reasonable collection efforts to collect the patient's portion of the charges. The
     size of the account, the collectibility of the account, and the cost of collection are
     appropriate factors, among possible others, in determining what are reasonable
     collection efforts under the circumstances. The practice should document its
     collection efforts in the patient's medical record by including copies of bills,
     letters, and reports of telephone and personal contact. Once the practice has
     utilized reasonable collection efforts, it may compromise the charges.

K.   NORTH CAROLINA'S FAIR DEBT COLLECTION PRACTICES LAW

     1.     Threats and Coercion

     Any debt collector (including a medical practice), is prohibited from collecting or
     attempting to collect any debt alleged to be due and owing from a consumer
     (including a patient or other responsible party) by means of any unfair threat,
     coercion, or attempt to coerce. Such unfair acts include, but are not limited to, the
     following:

     ·      Using or threatening to use violence or any illegal means to cause harm to
            the person, reputation or property of any person.
     ·      Falsely accusing or threatening to accuse any person of fraud or any
            crime, or of any conduct that would tend to cause disgrace, contempt or
            ridicule.



                                        9
·      Making or threatening to make false accusations to another person,
       including any credit reporting agency, that a consumer has not paid, or has
       willfully refused to pay a just debt.
·      Threatening to sell or assign, or to refer to another for collection, the debt
       of the consumer with an attending representation that the result of such
       sale, assignment or reference would be that the consumer would lose any
       defense to the debt or would be subjected to harsh, vindictive, or abusive
       collection attempts.
·      Representing that nonpayment of an alleged debt may result in the arrest
       of any person.
·      Representing that nonpayment of an alleged debt may result in the seizure,
       garnishment, attachment, or sale of any property or wages unless such
       action is in fact contemplated by the debt collector and permitted by law.
·      Threatening to take any action not in fact taken in the usual course of
       business, unless it can be shown that such threatened action was actually
       intended to be taken in the particular case in which the threat was made.
·      Threatening to take any action not permitted by law.

2.     Harassment

No debt collector shall use any conduct, the natural consequence of which is to
oppress, harass, or abuse any person in connection with the attempt to collect any
debt. Such unfair acts include, but are not limited to, the following:

·      Using profane or obscene language, or language that would ordinarily
       abuse the typical hearer or reader.
·      Placing collect telephone calls or sending collect telegrams unless the
       caller fully identifies himself and the company he represents.
·      Causing a telephone to ring or engaging any person in telephone
       conversation with such frequency as to be unreasonable or to constitute
       harassment to the person under the circumstances or at times known to be
       times other than normal waking hours of the person.
·      Placing telephone calls or attempting to communicate with any person,
       contrary to his instructions, at his place of employment, unless the debt
       collector does not have a telephone number where the consumer can be
       reached during the consumer's nonworking hours.




                                10
3.     Unreasonable Publication

No debt collector shall unreasonably publicize information regarding a
consumer's debt. Such unreasonable publication includes, but is not limited to,
the following:
·      Any communication with any person other than the debtor or his attorney,
       except:
       o      With the written permission of the debtor or his attorney given
              after default;
       o      To persons employed by the debt collector, to a credit reporting
              agency, to a person or business employed to collect the debt on
              behalf of the creditor, or to a person who makes a legitimate
              request for the information;
       o      To the spouse (or one who stands in place of the spouse) of the
              debtor, or to the parent or guardian of the debtor if the debtor is a
              minor and lives in the same household with such parent;
       o      For the sole purpose of locating the debtor, if no indication of
              indebtedness is made;
       o      Through legal process.
·      Using any form of communication that ordinarily would be seen or heard
       by any person other than the consumer that displays or conveys any
       information about the alleged debt other than the name, address and phone
       number of the debt collector except as otherwise provided in Article 2 of
       Chapter 75 of the North Carolina General Statutes.
·      Disclosing any information relating to a consumer's debt by publishing or
       posting any list of consumers, except for credit reporting purposes and the
       publication and distribution of otherwise permissible "stop lists" to the
       point-of-sale locations where credit is extended, or by advertising for sale
       any claim to enforce payment thereof or in any other manner other than
       through legal process.

4.     Deceptive Representation

No debt collector shall collect or attempt to collect a debt or obtain information
concerning a consumer by any fraudulent, deceptive or misleading representation.
Such representations include, but are not limited to, the following:
·      Communicating with the consumer other than in the name (or unique
       pseudonym) of the debt collector and the person or business on whose
       behalf the debt collector is acting or to whom the debt is owed.
·      Failing to disclose in all communications attempting to collect a debt that
       the purpose of such communication is to collect a debt.


                                11
·      Falsely representing that the debt collector has in his possession
       information or something of value for the consumer.
·      Falsely representing the character, extent, or amount of a debt against a
       consumer or of its status in any legal proceeding; falsely representing that
       the collector is in any way connected with any agency of the federal, State
       or local government; or falsely representing the creditor's rights or
       intentions.
·      Using, distributing or selling any written communication which simulates
       or is falsely represented to be a document authorized, issued, or approved
       by a court, an official, or any other legally constituted or authorized
       authority, or which creates a false impression about its source.
·      Falsely representing that an existing obligation of the consumer may be
       increased by the addition of attorney's fees, investigation fees, service
       fees, or any other fees or charges.
·      Falsely representing the status or true nature of the services rendered by
       the debt collector or his business.

5.     Unconscionable Means

No debt collector shall collect or attempt to collect any debt by use of any
unconscionable means. Such means include, but are not limited to, the following:
·      Seeking or obtaining any written statement or acknowledgment in any
       form containing an affirmation of any debt by a consumer who has been
       declared bankrupt, an acknowledgment of any debt barred by the statute of
       limitations, or a waiver of any legal rights of the debtor without disclosing
       the nature and consequences of such affirmation or waiver and the fact
       that the consumer is not legally obligated to make such affirmation or
       waiver.
·      Collecting or attempting to collect from the consumer all or any part of
       the debt collector's fee or charge for services rendered, collecting or
       attempting to collect any interest or other charge, fee or expense incidental
       to the principal debt unless legally entitled to such fee or charge.
·      Communicating with a consumer (other than a statement of account used
       in the normal course of business) whenever the debt collector has been
       notified by the consumer's attorney that he represents said consumer.
·      Bringing suit against the debtor in a county other than that in which the
       debt was incurred or in which the debtor resides if the distances and
       amounts involved would make it impractical for the debtor to defend the
       claim.




                                12
II.   NAVIGATING A PATIENT'S BANKRUPTCY
      A.   CHAPTERS 7 AND 13 - INTRODUCTION
           Generally, both Chapter 7 bankruptcy and Chapter 13 bankruptcy are available to
           patients desiring bankruptcy protection. Under Chapter 7, the focus is on
           liquidation and quickly starting over. Under Chapter 13, the focus is on retaining
           assets and reorganizing over a period of years.

           For simplicity, this discussion will assume that the patient is the one who files
           bankruptcy. However, the legal concepts are the same where a responsible party
           other than the patient files bankruptcy.

      B.   COMMENCEMENT OF A BANKRUPTCY CASE

           A bankruptcy case is commenced by the patient's filing with the bankruptcy clerk
           of court a bankruptcy petition. The patient is not entitled to bankruptcy protection
           until the petition actually is filed. Although not required, a bankruptcy petition
           can be filed jointly by husband and wife. However, one spouse cannot put the
           other into bankruptcy without the other spouse's consent. In addition to the
           petition, the patient is required to file several schedules listing, among other
           things, creditors, assets, debts, and monthly income and expenses.

      C.   BANKRUPTCY NOTICE

           Only those creditors who are listed in the patient's bankruptcy schedules will
           receive formal notice of the bankruptcy. The bankruptcy notice sets forth, among
           other things, the date, time and place for the first meeting of creditors and the
           deadline and address for filing proofs of claims. Even if a medical practice is not
           listed and does not receive formal bankruptcy notice, if the medical practice is
           aware of the bankruptcy, then the medical practice is bound by the bankruptcy
           and should determine the deadline and address for filing a proof of claim.

      D.   FIRST MEETING OF CREDITORS

           The formal bankruptcy notice will set forth the date, time and place of the first
           meeting of creditors. Generally, it is the one and only meeting of creditors. Your
           case will be one of many scheduled for the same date, time and place. The
           Trustee has only five or ten minutes to devote to each case, and it may take
           several hours to reach your case. Therefore, it usually is a waste of time to attend
           the first meeting of creditors.

      E.   AUTOMATIC STAY

           One of the more significant bankruptcy protections afforded to a patient (or
           responsible party) is the automatic stay. The automatic stay arises immediately
           upon the filing of the bankruptcy petition and terminates when the bankruptcy
           case is dismissed or concluded. The automatic stay applies to each medical
           practice which is a creditor, even if the medical practice is not aware of the

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     bankruptcy filing or not listed on the bankruptcy schedules. The automatic stay
     forbids a medical practice from taking any action against the patient (for example,
     telephone calls, letters, billing statements showing balances containing pre-
     bankruptcy charges, suits, judgments) to collect a debt that arose prior to the
     bankruptcy filing. It also forbids a medical practice from taking any action
     against the patient's property, regardless whether the debt arose before or after the
     bankruptcy filing. If a medical practice willfully violates the automatic stay, then
     the patient may recover actual damages, including costs and attorneys' fees, and,
     in appropriate circumstances, punitive damages.

     If a medical practice believes that a patient may have filed bankruptcy but has not
     received formal written notice, then the medical practice should ask the patient for
     the name and telephone number of the patient's bankruptcy attorney and contact
     the attorney to ascertain whether the filing has occurred. As soon as the medical
     practice learns of a bankruptcy filing, the practice should advise any collection
     agency or attorney handling the account on behalf of the practice to stop all
     collection efforts.

     The automatic stay does not prohibit billing, collecting, suing, and obtaining a
     judgment for services rendered after the bankruptcy filing. However, execution
     on property of the patient should await the conclusion of the bankruptcy case.
     The medical practice should exercise caution to ensure that any bills sent to the
     patient for services rendered after the bankruptcy filing do not also include unpaid
     amounts for services provided prior to the bankruptcy filing.

     North Carolina law imposes certain time limitations ("statutes of limitation") on
     bringing a lawsuit to collect a debt. Situations may arise where a patient files for
     bankruptcy, thereby automatically imposing the automatic stay (and, in Chapter
     13 cases, as will be seen below, the co-debtor stay). Particularly in Chapter 13
     cases, the stay may last for years, such that the applicable statute of limitations
     otherwise might expire while the automatic stay is still in place (thereby
     preventing the initiation of a collection lawsuit against the patient). However, in
     both Chapter 7 and Chapter 13 cases, the Bankruptcy Code extends the time to
     commence such collection actions to 30 days after notice of the termination or
     expiration of the automatic stay, if such date is later than the expiration of the
     original statute of limitations.

F.   CHAPTER 7

     Under Chapter 7, a court-appointed Trustee is responsible for collecting and
     selling any non-exempt property of the patient. As each item of non-exempt
     property is sold, the creditors whose claims are secured by that property are paid
     first from the sale proceeds and any remaining funds are distributed by the
     Trustee to unsecured creditors. Most Chapter 7 cases are "no asset" cases,
     meaning there is no unencumbered, non-exempt property worth the Trustee's time
     and expense to sell. Generally, a bankruptcy discharge will follow very shortly
     after the Chapter 7 filing.


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 G.   CHAPTER 13

      Whereas the focus in Chapter 7 is on liquidation, the focus in Chapter 13 is on
      reorganization. Under Chapter 13, the patient retains his property and, pursuant
      to a court-approved plan, makes monthly payments over three to five years to the
      Chapter 13 Trustee who, in turn, disburses funds to creditors in accordance with
      the plan. Generally, the patient will receive a bankruptcy discharge only if and
      when the patient completes the plan.

H.    CO-DEBTOR STAY

      In addition, the automatic stay, a co-debtor stay is available under Chapter 13, but
      not Chapter 7. The co-debtor stay arises immediately upon the filing of the
      bankruptcy petition. The co-debtor stay applies to each medical practice which is
      a creditor, even if the medical practice is not aware of the bankruptcy filing or not
      listed on the bankruptcy schedules. The co-debtor stay forbids a medical practice
      from taking any action (including telephone calls, letters, billing statements
      showing balances containing pre-bankruptcy charges, suits, judgments) against a
      guarantor of, or other party responsible for, medical services furnished prior to the
      bankruptcy filing.

      If the Chapter 13 plan provides that unsecured debts are to be paid less than in
      full, then a medical practice may seek and obtain bankruptcy court approval to
      permit the practice to collect from the co-debtor the amount projected not to be
      paid through the bankruptcy. However, the co-debtor stay applies until such
      bankruptcy court approval is obtained or the bankruptcy case is completed,
      dismissed, or converted to Chapter 7.

I.    DISCHARGE

      The discharge is the ultimate goal of all patients who file bankruptcy. A patient
      who files Chapter 7 generally will receive a discharge a few months after the
      bankruptcy filing. A patient who files Chapter 13 bankruptcy generally will not
      receive a discharge unless and until the plan is completed.

      Whereas the automatic stay is a temporary bar against certain creditor actions, the
      discharge is a permanent bar against such actions. A medical practice is barred
      permanently from attempting to collect from a bankrupt patient (but not from a
      co-debtor) any debt which was discharged in bankruptcy. Generally, a debt for
      medical services furnished prior to the bankruptcy filing is discharged by a
      discharge order in a Chapter 7 or Chapter 13 case. A debt for medical services
      furnished after the bankruptcy filing is not discharged.

J.    CONVERSION OR DISMISSAL

      If a patient who files Chapter 13 bankruptcy fails to make the required plan
      payments to the Chapter 13 Trustee, then the bankruptcy case likely will be
      dismissed or converted to Chapter 7 bankruptcy. If the case is dismissed, then the

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     automatic stay and co-debtor stay no longer apply, the patient does not receive a
     discharge, and the medical practice may proceed against the patient and co-debtor
     as if the bankruptcy never happened. On the other hand, if the bankruptcy case is
     converted from Chapter 13 to Chapter 7, then the automatic stay continues in
     effect, but the co-debtor stay does not. The patient usually will receive a Chapter
     7 discharge effective for debts that arose prior to the bankruptcy filing (not prior
     to the conversion).

K.   BANKRUPTCY PROOFS OF CLAIM

     In order to receive any money from the Chapter 13 Trustee on account of services
     furnished prior to the bankruptcy filing, a medical practice must file a proof of
     claim in a Chapter 13 bankruptcy case prior to the stated deadline for doing so.
     The notice of bankruptcy filing will state the deadline, and the proof of claim
     form accompanying the notice can be used.

     A Chapter 7 case is either an "asset" case or a "no asset" case. An "asset case" is
     a Chapter 7 case in which there is a likelihood that unsecured creditors will
     receive money from the Chapter 7 Trustee. Proofs of claim must be filed in an
     "asset case" in order to receive money. The notice of bankruptcy filing will state
     the deadline, and the proof of claim form accompanying the notice can be used.

     A "no asset" case is a Chapter 7 case in which there is no likelihood for recovery
     by unsecured creditors. Proofs of claim need not be filed in a "no asset" case.
     The notice of filing of a Chapter 7 bankruptcy case will indicate whether the case
     is an "asset" or "no asset" case. That is, the notice either will contain a deadline
     for filing proofs of claim, or it will ask creditors not to file proofs of claim. A
     case could start out as a "no asset" case and later the Chapter 7 trustee could
     locate assets. In that situation, a separate notice will be sent to creditors advising
     of the deadline for filing proofs of claim and enclosing a proof of claim form.

L.   DOCTRINE OF NECESSITIES

     3.     Chapter 7 Implications

     There is no co-debtor stay in a Chapter 7 bankruptcy. Therefore, a medical
     practice may pursue a patient's spouse for collection without regard to the
     bankruptcy. The automatic stay and the Chapter 7 bankruptcy discharge also do
     not affect the medical practice's rights against the spouse.

     4.     Chapter 13 Implications

     The co-debtor stay in a Chapter 13 temporarily prohibits a medical practice from
     pursuing recovery from the patient's spouse for services furnished prior to the
     bankruptcy filing. In order to pursue the spouse for these debts, a medical
     practice must either first obtain relief from the co-debtor stay (with respect to the
     portion expected not to be paid through the Chapter 13 bankruptcy plan) or wait
     until the Chapter 13 case is completed or dismissed. The Chapter 13 bankruptcy

                                       16
               discharge does not affect the medical practice's rights against the co-debtor.
               However, because of the length of a Chapter 13 bankruptcy case, the medical
               practice should take care to file suit against the spouse prior to the later of the
               original expiration of the three-year statute of limitations or the 30-day grace
               period discussed above.

       M.      INSURANCE CLAIMS

               With respect to medical services furnished after the bankruptcy filing, the
               automatic stay and discharge do not bar a medical practice from collecting
               insurance proceeds, regardless whether the assignment of health insurance
               benefits is signed by the patient before or after the bankruptcy filing.

               As to medical services furnished prior to the bankruptcy filing, if an assignment
               of health insurance benefits is signed by the patient prior to the bankruptcy filing,
               then the automatic stay and discharge do not bar a medical practice from
               collecting the insurance proceeds. However, if the assignment of health insurance
               benefits is not signed by the patient prior to the bankruptcy filing, then it may be a
               violation of the automatic stay and discharge to ask the patient to sign an
               assignment of health insurance benefits after the bankruptcy filing.

       N.      TERMINATING THE PHYSICIAN-PATIENT RELATIONSHIP FOR
               NONPAYMENT

               Bankruptcy law generally does not affect a physician's right to refuse treatment to
               a patient where such right otherwise exists (see discussion above on termination
               of physician-patient relationship). However, it would be a violation of the
               automatic stay or discharge to advise a patient that future treatment is conditioned
               upon payment of services furnished prior to the bankruptcy filing where the
               purpose of such communication is to encourage the patient to pay the debt.




ND: 4815-4434-6883, v. 1




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