In the country's current economic downturn, the cost of medical care can easily send a person into an economic tailspin. Those who lose their jobs may suddenly find themselves without health insurance. With the astronomical cost of health care, if a person gets sick and has no insurance, the debt can mount quickly. Declining home values mean that many people no longer have significant assets to use to pay off these bills. Some use credit cards to pay medical providers, lest the provider no longer offers treatment for non-payment, so they also have significant interest rates compounding the amount of money they already owe. The situation leads many people to seek bankruptcy protection.
Medical Debts Growing in the U.S.
Many people are feeling the strain of rising medical costs. The Commonwealth Fund reported that over 44 million Americans owed money on medical bills in 2011, up from 8 million in 2005. Results from a 2010 survey by the Center for Studying Health System Change showed that one in five of those with medical debt were struggling to pay their bills, while one in four were considering filing bankruptcy.
CredAbility, a non-profit credit counseling agency, reported similar findings. According to its data, about 20 percent of the people filing bankruptcy in 2010 and 2011 cited medical bills as the main reason they were filing. In contrast, only 12 to 13 percent reported medical bills were the reason they were filing in the two years prior.
Bankruptcy as an Option
One of the major benefits that bankruptcy offers people is protection from creditor harassment. Once a person files bankruptcy, the court puts an automatic stay on collection actions, meaning people no longer have to face threatening letters and phone calls from collection agencies.
Most medical debt is unsecured debt and can be discharged in bankruptcy. Once a person receives the bankruptcy debt discharge, he or she will no longer be personally liable for paying the debt.
Talk to an Attorney
The decision to file bankruptcy should not be taken lightly. Those who are struggling to pay medical bills should seek the counsel of a bankruptcy lawyer who can discuss their options with them.