Medical debt is a leading cause of bankruptcy in the United States

March 26, 2013

Medical debt is a leading cause of bankruptcy in the United States

Article provided by Costello & Costello, P.C.
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A study recently released in the American Journal of Medicine found medical debt contributed to over 62 percent of bankruptcy petitions. The researchers also found those who needed to file for bankruptcyrelief were often middle aged, middle class, college educated homeowners.

There were two main causes for financial hardship tied to medical debt: an illness that kept an individual from working and earning income or excessive medical bills for treating an illness.

How to lower medical expenses

In some cases, proactive steps can reduce the risk of high medical bills. These steps include:
-Reviewing your insurance coverage
-Reviewing your bill
-Negotiating the cost of care

Many insurance plans have specific doctors, medical facilities and procedures that are covered. Before making an appointment, check to see that the provider is covered.

Also, review your bill. Sometimes a billing error can lead to an erroneous charge. Compare the billed services with the services received and make sure they match up. If they don't, communicate with the billing office until the matter is resolved.

If the bill is correct but you are still unable to make full payment, attempt to negotiate with the provider. Some providers are willing to consider payment plans or even reduce the amount owed.

Bankruptcy can offer relief

Unfortunately, even after these steps are taken there are times when medical debt can become overwhelming. In these situations, bankruptcy may provide needed financial relief.

Bankruptcy is based in federal law and was enacted by Congress to provide debtors with a "financial fresh start from burdensome debts." If accepted, a bankruptcy petition can accomplish two goals: discharge debts and prohibit creditors from further pursuing action against the filer.

An individual can generally qualify for relief through either a chapter 7 or chapter 13 bankruptcy filing. Filing for a chapter 7 bankruptcy petition will discharge or eliminate most debts. This includes credit card debt, medical debt and other forms of consumer debt. A chapter 13 petition allows a consumer to put together a court-supervised repayment plan to pay back debts. The repayment plan typically spans three to five years.

Deciding which type of petition is right for your situation is difficult. If you are considering filing for relief from debt through bankruptcy, contact an experienced bankruptcy attorney to discuss your situation and help determine if bankruptcy is the right step for your financial future.