Medical Debt and Bankruptcy

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Medical Debt Is A Grave Problem

Sometimes Bad Things Happen To Good People

I know it sounds trite and everyone has heard this saying before, but it’s true.  Bad things do happen to good people.  Medical debt is the number one reason people file for bankruptcy, beating out credit card debt and other types of debt.  And even if you have health insurance, you still may run into financial difficulty due to health issues or a major accident.

This was the conclusion of a study in 2014 conducted by NerdWallet Health, a division of a price-comparison website. NerdWallet Health analyzed data from the U.S. Census, The Centers for Disease Control, the federal court system and the Commonwealth Fund, a private foundation that promotes efficiency and access to the U.S. healthcare system.

It was estimated that households containing 1.7 million people will file for bankruptcy protection in 2014.  Even outside of bankruptcy, about 56 million adults—more than 20 percent of the population between the ages of 19 and 64—will struggle with health care or hospital related bills this year, according to NerdWallet Health.

Even if you have health insurance, it does not mean you will be adequately protected from large health related or accident related bills.  Many people with health insurance still file for bankruptcy because their insurance only covers so much.  NerdWallet estimated almost 10 million adults with year-round health-insurance coverage will still accumulate medical bills that they can’t pay off.  This is especially true for those households who have high-deductible health plans.  Basically, a high medical bill combined with a high-deductible insurance plan can quickly become something families cannot pay.

It’s not just the medical bills themselves, but also the effect the medical issues have on families.  If a family member is seriously ill or injured, health insurance does not cover such things as lost wages, child care, travel, and other expenses.  Taking all these factors into account, it is not surprising that medical issues are a large factor in bankruptcies.

How Are Medical Bills Treated in Bankruptcy?

In bankruptcy, medical bills are considered unsecured nonpriority debts just like credit cards and other unsecured debts.  Medical bills do not receive any priority treatment and can easily be discharged or erased by filing for bankruptcy.  If you qualify for Chapter 7 bankruptcy, your medical bills will be discharged and you will not have to pay any of them.  In Chapter 13, you may pay a portion of your medical bills.  This is dependent upon your income, expenses, and other factors that are unique to your situation.

If you want to check out the aforementioned study, please go to  http://www.nerdwallet.com/blog/health/2014/03/26/medical-bankruptcy/

 

Richard G. Allen

 

 

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