Bankruptcy can be the solution to crushing medical debt
A study finds that medical debts cause the majority of bankruptcies.
When you think about what causes a person to file for bankruptcy protection, you may think that being irresponsible with credit cards or other acts of financial carelessness are the root causes in most cases. However, this is an erroneous conclusion. According to a study released earlier this year by NerdWallet Health, about three out of five bankruptcies are filed because of a basic human need-healthcare.
According to the study, unaffordable medical bills will cause about 2 million Americans to file for bankruptcy during 2014, which is a far larger cause than credit card bills or mortgage debt. Even among those who do not file bankruptcy, the study found that about 20 percent of the population between the ages of 19 and 64 (56 million adults) will be hit with high medical debts this year.
Although it may be tempting to think that only the uninsured struggle with medical debts, the study found that this was not accurate. About 10 million Americans with heath insurance will be faced with unaffordable medical debt this year. The reason for this is that even insured persons often face high costs that are not covered by their insurance such as: medical tests, specialist visits, long-term hospitalization, ambulance fees and medical equipment costs. For this reason, the recently enacted Affordable Care Act will likely not significantly reduce the number of bankruptcies caused by medical debt, although it will give more people insurance coverage.
Bankruptcy offers a way out
In order to get the treatment that they need, people often go to great lengths. According to the study, about 11 million people turn to credit cards to finance their treatments. Additionally, a further 15 million people deplete their savings in an attempt to pay for their care. Once their credit cards are maxed out and their savings spent, these people are left in a desperate financial position.
Fortunately, help is available long before this hopeless stage has been reached. Filing either Chapter 7 or Chapter 13 bankruptcy allows the majority of people to discharge virtually all of their unsecured debt. This type of debt is defined as debts where the promise to pay is not secured by collateral, which includes credit cards and medical debts. Once the filer has finished the bankruptcy process, he or she is free of virtually all unsecured debt that existed before the bankruptcy was filed, allowing a new financial start.
If you are struggling to keep up with the high cost of healthcare, it is invaluable to know your options for relief before your situation turns desperate. An experienced bankruptcy attorney can analyze your unique situation and recommend the best way to obtain a brighter financial future.
Keywords: bankruptcy, medical debt