Record-high medical costs fuel bankruptcy filings across the country
Medical costs have skyrocketed in recent years. In fact, they are one of the three leading causes of bankruptcy filings in America today. Increased premium and medication costs, as well as a stagnant national minimum wage have left many people without coverage and in the precarious position of being only an injury or illness away from financial ruin. Surprisingly, though, even those with medical insurance are at risk of out-of-control debt stemming from deductibles, high co-pays, prescription drug costs, out-of-network treatment and the added expense of specialists.
To add insult to injury, medical debt collectors are known as some of the most persistent and most abusive in the collection industry. The pressure from collectors is another added worry for those already dealing with a medical crisis. There is help, though. Depending on your financial situation, there are options to handle past unmanageable medical debt and steps to take that can prevent a similar situation in the future.
Is bankruptcy right for you?
Bankruptcy is not for everyone. It might be that negotiating with a creditor or setting up a payment plan directly with a medical care provider is the best solution. Other times, though, a bankruptcy is the wisest course of action. Even so, a bankruptcy filing is not to be taken lightly, and should be discussed with an experienced bankruptcy attorney before a final decision is made about whether to seek bankruptcy protection. That being said, it can offer a fresh financial start for someone facing a mountain of medical debt. Sometimes it is even possible for wage garnishments and liens levied in the 90 days before a bankruptcy filing to be repaid to the filer, potentially freeing up much-needed income for payment of essential expenses like utilities and housing costs.
How bankruptcy works
There are different types of personal bankruptcy filings that can offer debt relief to individuals, but most common are under Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code. Both of these plans will offer wide-reaching debt management solutions, but they are different in how they approach debt.
Chapter 7, for example, is commonly known as a "liquidation bankruptcy." It typically involves selling non-exempt assets and using the proceeds to pay creditors. After the payments have been made, any remaining debt is usually discharged, meaning that the financial slate has essentially been wiped clean.
Chapter 13 is different from Chapter 7, but it is still very effective at giving filers relief from crushing debt. It involves consolidating all qualifying debts in to one monthly payment for a set period - usually three to five years - after which leftover debt is forgiven.
Staving off medical debt crises in the future
Theoretically, the national healthcare program that goes into effect in 2014 will cut down on the need for medical debt-inspired bankruptcy filings by ensuring that every American has insurance coverage. That remains to be seen, and only time will tell if the program operates as intended. In the meantime, though, there are several ways to keep medical expenses from spiraling out of control, including:
Purchasing catastrophic injury coverage with a high deductible - these policies will kick in once medical bills hit a certain point, usually around $5000 or $10,000, but they offer protection from spiraling debt that can financially cripple a family
Negotiating payments with the provider - some hospitals, doctors and clinic systems are willing to negotiate medical expenses to ensure that they receive some payment for their services
Building up an emergency savings account that can help defray unexpected costs
Getting help now
No matter if medical debt, divorce, job loss or other reasons are influencing your decision to learn more about bankruptcy protection, a local bankruptcy attorney can analyze your debts, give you more information about your options and get you started on the path to improving your financial situation.