Personal bankruptcies are often viewed as being the result of financial irresponsibility. While it may be true that some people spend recklessly and deliberately in a way that will ultimately lead to bankruptcy, there are plenty of other things beyond a consumer’s control that can devastate his or her finances. Health problems are just one example. It turns out that the uncontrolled rise of healthcare costs is driving personal bankruptcies in the U.S.
A 2014 report by FOX Business explained that healthcare costs have been rising at rates considerably higher than inflation for years. In the last seven or eight years, excessive medical expenses have gone from being one factor in personal bankruptcy to being the primary factor in a growing number of cases. Things are so frightening in the healthcare arena that a 2013 study from NerdWallet Health predicted that an inability to pay medical expenses would eventually become the number one reason people file for personal bankruptcy.
Insured or Uninsured, It Does Not Matter
The total cost of medical expenses quickly becomes the elephant in the room when a person is diagnosed with a major illness or suffers from a devastating injury. We naturally want the best possible care for ourselves and our loved ones, but there is always the question of how that care is paid for. The unfortunate truth is that being insured or uninsured does not really matter. According to FOX Business, 78% of those who file bankruptcy because of unpaid medical bills have health insurance.
How can that be? Because there are a lot of things health insurance just does not cover. Things such as co-pays, deductibles, uncovered medicines and medical equipment, and the indirect costs of healthcare including lost wages and transportation can all add up very quickly. A cancer patient, for example, can realize medical expenses that quickly exceed mortgage and credit card debt long before treatment is concluded.
Medical Bankruptcy Is a Consideration
It is always best when bankruptcy is viewed as a last resort for solving financial problems. This is true even in medical cases. Nevertheless, the absence of any real means to get out from under excessive medical debt may mean that a chapter 7 or 13 bankruptcy is the only option.
Chapter 7 bankruptcy is a liquidation proceeding that involves liquidating any qualifying assets to pay off as much debt as possible, followed by discharging any remaining qualifying debt. It is possible to file a chapter 7 proceeding with the goal of only addressing medical debt as long as the consumer discloses all current debt and is willing to use a reaffirmation agreement to waive discharge of all non-medical debts.
Chapter 13 bankruptcy is a reorganization proceeding that allows the consumer to create a feasible repayment plan. A court will usually insist on chapter 13 if there is sufficient evidence to suggest reorganization is possible. The biggest challenge with reorganization is coming up with a workable plan that can still be maintained in the future should further medical problems persist.
You Need Legal Advice
It is unfortunate that increasing healthcare costs are driving bankruptcies in this country. But it is what it is. Our advice to you is to seek out an experienced bankruptcy attorney capable of advising you how to proceed in your case. If you are facing overwhelming medical costs with no reasonable hope of paying what you owe, bankruptcy might be your best option. One of our attorneys can take a look at your case and advise you on both chapter 7 and 13 proceedings.