When a medical emergency or unexpected illness is experienced by you or your spouse, the stress of the illness, the loss of work and emotional strife may seem like it’s enough to break even the strongest person. However, in many cases, the worst is yet to come. Recent studies reveal that medical debt is the most common cause of personal bankruptcy in America. One in five Americans will struggle to pay medical bills this year. A sudden accident or diagnosis can touch anyone’s lives unexpectedly and create mountains of bills for years to come. Bankruptcy is often times a last resort, after savings and assets are drained, creating financial ruin.
Who Does This Affect?
Medical debt that leads to bankruptcy can happen to anyone, not just the uninsured.
Statistics from 2013 indicate the following:
- 56 million Americans under the age 65 will struggle to pay medical bills.
- Over 35 million adults will be contacted by debt collectors due to unpaid medical bills.
- Over 15 million adults will deplete their savings accounts for unpaid medical bills.
- Nearly 10 million adults will be unable to pay rent or other necessities due to their medical bills.
- 1.7 million adults live in households that will declare bankruptcy due to their inability to pay medical bills.
What Can Be Done?
Overwhelming medical debt is not an issue facing the uninsured alone.
In fact, research shows that many people who file for bankruptcy due to exorbitant medical costs have existing health insurance coverage. The actual medical bills are not the only issue. The inability to work and earn a living and additional medical expenses, such as transportation to appointments and co-payments can quickly add up.
A breast cancer patient can easily incur out-of-pocket costs for a year of treatment that amount to $8,500 for co-pays, co-insurance and travel. That figure doesn’t factor in lost wages, day care and other expenses associated with cancer and other treatments. When patients have a high deductible health insurance plan, the debt is even greater.
In a previous blog post, we discussed Bankruptcy Credit Counseling and this is a great first step when looming medical bills have caused you to consider filing for bankruptcy. Just like any personal debt, you may opt for Chapter 7 bankruptcy, where assets are liquidated and the debts are cleared or Chapter 13, which organizes the debt in to a manageable payment plan. In some cases it is possible to keep a home mortgage and discharge medical debt in the bankruptcy, but the court must be made aware of all assets and the negotiation of such a situation requires a lawyer.
Prior to filing for bankruptcy, it may be possible to negotiate with the hospital or doctor’s office. If the debt has already progressed to a collection agency, the period for negotiations has likely expired and it is time to consult with a specialized attorney.