According to a study conducted by credit counseling agency CredAbility, 20 percent of people receiving credit counseling — which is a prerequisite for filing for bankruptcy — cite medical bills as the reason that they need bankruptcy protection. The organization says this is a spike from the previous two years, when 12 to 13 percent of consumers seeking bankruptcy said that medical bills were the cause of their financial difficulties.
Michelle Jones, CredAbility’s Senior Vice President of Counseling, told the New York Times that the reason for the spike is the perfect storm of rising medical costs and shrinking available job opportunities, which has made it necessary for many Americans to charge their medical bills on credit cards. This, coupled with the fact that many people feel like they must pay their medical bills no matter what, has created a financial downward spiral for many consumers.
Wiping Out Medical Debt Through Bankruptcy
As with other types of debt, bankruptcy can help consumers get relief from medical bills they can’t afford to pay.
Bankruptcy is not for everyone, however. When deciding on whether or not to file for bankruptcy, you should consider the following:
- What type of bankruptcy is best for your situation? With Chapter 13 bankruptcy, you will be required to pay back your creditors over a three to five-year period — after which, remaining debts will be discharged. On the other hand, if you file for Chapter 7 bankruptcy many of your debts will be discharged right away.
- Whether or not you want to keep your home. If you file for Chapter 13 bankruptcy, you will be able to make current any missed mortgage payments.
- Whether your debts are covered in a bankruptcy. Not all debts can be wiped out in a bankruptcy. You will still be responsible for payments for child support and student loans.
For many people saddled with mounting medical bills, bankruptcy may provide a way to a fresh financial start. An attorney experienced in handling bankruptcy matters can advise you on all of your options for addressing your financial situation.