Data shows medical debt a huge factor in American bankruptcies

June 15, 2013

Ever-increasing medical costs, coupled with the nation's high unemployment rate for the last several years - something that has indirectly contributed to the medical debt crisis, as many people lost health insurance coverage along with their jobs - has led many households to the brink of financial ruin. Data released by the American Journal of Medicine and the National Patient Advocate Foundation shows that more than 60 percent of America's individual bankruptcy filings are due to excess medical debt.

Interestingly, more than 70 percent of those filers had health insurance, but still incurred more out-of-pocket medical expenses than they could manage. Additional information compiled by the Centers for Disease Control shows that one-third of Americans are currently struggling with medical debt, and that as many as 10 percent of the nation is financially unable to make payments on their medical bills at all, something that might indicate the need for future bankruptcy protection.

Debt management options

The nation is hopeful that government intervention and a new healthcare system like the one proffered by the Patient Protection and Affordable Care Act (going into effect in 2014) will have an impact on the number of medical-related bankruptcies, but that remains to be seen. In the meantime, there are ways for those facing unmanageable medical debt to find relief.

Patients (or their responsible parties) can always try to set up payment plans with their hospitals, clinics and individual physicians. This might be able to break the debt into manageable payments that can fit within the family's budget. However, this option might not be viable for those on a fixed income or who have no "wiggle room" in their budget for additional expenses.

Another medical debt management option is to negotiate a lower payment with providers. Oftentimes medical care facilities and providers will accept a lower, one-time payment on a large bill to ensure that they do receive some funds and that they will not have to incur indefinite collection-related expenses. Again, this might be difficult for someone on a fixed income or a tight budget.

Other patients choose to put medical expenses on credit cards, borrow funds (from banks or from loved ones) or take on additional employment to cover the debt. These come with risks of their own, as the interest on the debt could itself present payment issues in the future; a bankruptcy filing might still be necessary. Furthermore, additional employment could lead to body fatigue and, ironically enough, illnesses or conditions that could themselves result in more medical debt.

There are also bankruptcy options for those buried in medical debt. Both Chapter 7 and Chapter 13 bankruptcy protection can ease the burden of huge medical expenses, but they take very different approaches. To learn more about how personal bankruptcies like Chapter 13 and Chapter 7 work, or to find out about additional debt management, negotiation or modification options that might be right for you, seek the advice of an experienced bankruptcy attorney in your area.

Article provided by Derren S. Johnson & Associates
Visit us at www.derrensjohnson.com