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Medical Bills Leading Cause of Bankruptcy Filings

A recent study published in The American Journal of Medicine showed that medical bills are one of the leading reasons why people end up filing bankruptcy. The study showed that over 60 percent of those filing bankruptcy in 2007 were doing so due to medical costs, up from 46 percent of filers in 2001. It is important for people to realize how unexpected medical expenses can cause a financial crisis and how filing bankruptcy can help.

Results of the Study

Researchers asked a sample of 2,314 people who filed bankruptcy in early 2007 about the reasons why they were filing and examined the court records of those bankruptcy filings. The study’s authors concluded that 62.1 percent of the people in the sample were filing due to medical bills. The authors classified medical bills as the reason for the bankruptcy filing if the filer had at least $5,000 or 10 percent of pre-tax income in outstanding medical bills, had mortgaged his or her home to pay medical bills or had lost significant income due to an illness.

Most of those filing bankruptcy due to medical bills were middle-class, well-educated homeowners. Seventy-eight of the people filing bankruptcy had health insurance but those in the survey sample population still managed to accrue an average of $17,943 in out-of-pocket expenses for things that their insurance did not cover such as deductibles, co-pays and unapproved services. Others got so sick that they could no longer work and lost their employer-provided health insurance.

The study’s authors noted that they conducted their research prior to the major downturn in the economy of November 2008 and suggested that the number of people filing bankruptcy due to medical bills has likely increased since 2007. The authors also do not believe that the 2010 health care reform bill will improve the situation, as they also examined bankruptcies in Massachusetts after that state passed health care reform similar to the national bill and found that the state’s health care reform did not decrease bankruptcies due to medical bills.

How Filing Bankruptcy Can Help

Bankruptcy is one option for those in dire financial straits. When a person files bankruptcy, he or she is able to discharge unsecured debts such as medical bills and is no longer personally liable for them. Filing bankruptcy stops collection agency harassment and wage garnishment actions until the bankruptcy court grants the final debt discharge, as well.

If you have been ill and are now struggling with insurmountable medical bills, call an experienced attorney who can discuss your situation with you and advise you of your options.