Dubiln Packard

medical bankruptcy

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Medical Debt: I Need Help!

Medical debt can quickly become a nightmare, especially if you don’t have health insurance.  Sometimes filing for bankruptcy can help if your medical debt is so much that you can’t afford to pay it.

Two years ago, Tracy ended up in the emergency room of her local hospital after falling off a ladder when she was painting her kitchen.  She had broken two ribs.  She didn’t have health insurance, but figured the cost wouldn’t be astronomically high – she and her husband would figure out a way to pay it off.  Life happens, right?

She didn’t expect the bills to run over $25,000.00.  She filed for state-funded Medicaid, but was told her husband makes too much money for her to qualify.  She filed for the local hospital’s “Charity Care” program, but was told the same – she didn’t qualify because she and her husband make “too much money.”

Tracy’s husband manages a restaurant.  He makes just under $60,000 per year.  Tracy stays home with their baby daughter.  After their $1,300 per month mortgage payment, 2 car payments, car insurance costs, utility bills, and she and her husband’s maxed-out credit card bills, there’s barely enough money left at the end of the month to buy food.  Tracy couldn’t believe these people were telling her they make “too much money.”

Tracy consulted with a lawyer she knew to try and get the hospital to forgive the debt.  Her lawyer pleaded with the billing company, asking them to consider the fact that they just didn’t have enough money to even make small payments toward the $25,000 medical debt.  The hospital refused to make any accommodations.  Tracy refused to pay a dime toward the debt, because she felt they should understand her situation.  But the bills kept coming, and eventually she started getting calls and letters from collection agencies.  Because the debt had gone to collection, her personal credit score was now trashed.  She had been responsible her entire life, now because of some inflated medical costs she couldn’t afford, everything she had worked for was in question.

Tracy called a NJ bankruptcy lawyer and learned that if she filed for bankruptcy, she could get ALL of the medical debt and her credit card debt forgiven at the end of the bankruptcy program.  Her lawyer worked with her to come up with a plan, based on her household income, so that she can continue to make her car and mortgage payments on time, and still afford to buy food and pay her utilities.  She stopped paying her unsecured debt (medical and credit card debt), and at the end of the bankruptcy plan the $25,000.00  medical costs and her credit card bills were dismissed.

What had been a nightmare was finally resolved.  Tracy could get back to living a normal life.  Filing for bankruptcy isn’t a quick fix and isn’t supposed to be overused, but in Tracy’s case it was a valid solution to her problems.

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Medical Expenses Is Still The Number One Reason Why People File Bankruptcy

After a year-upon-year tally of the many bankruptcy cases I do each year, I have found that the number one reason why people file bankruptcy is still medical expenses.

Having extraordinary medical expenses is still the number one reason why people file bankruptcy my research shows.

A 2005 study by Harvard University showed then that 62% of bankruptcy filers filed bankruptcy due to their inability to pay enormous medical expenses after a significant illness or injury.  My own records show this still to be true.

Cancer Takes A Financial Toll.

Of the most financially devastating diseases, cancer reigns supreme. The American Cancer Society estimates that the 2010 total cost of cancer in the U.S. rose to $263.8 billion. So perhaps unsurprisingly, a new study by the Fred Hutchinson Cancer Research Center shows a close link between cancer diagnosis and personal bankruptcy. Compared to the general population, bankruptcy rates are nearly twice as high among cancer patients one year after diagnosis.  Of the bankruptcies caused by a cancer, a surprising 78% reported having some form of health insurance.

Many Are Covered By Health Insurance.

Overall, three-quarters of the people with a medically-related bankruptcy had health insurance.

I found a very high percentage of people who filed had health insurance, but many of them were bankrupted anyway because there were gaps in their coverage like co-payments and deductibles and uncovered services.  Other people had private insurance but got so sick that they lost their job and lost their insurance.

Many middle-class Americans feel insulated from these growing costs by medical insurance, but often when serious medical problems arise, that safety net either disappears or proves to be full of holes.

For Most, Health Insurance Is Employer Based.

For most, medical insurance is employer-sponsored. That means the insurance can disappear when illness or injury makes working impossible.

Although COBRA laws allow the employee to extend the insurance coverage by assuming payments, that solution falls short for many. COBRA can be very expensive and coverage is limited in duration, so an illness or injury that prevents work in the long-term will ultimately outlast those benefits.

Even people with active medical insurance coverage often end up with large bills as co-payments, non-covered services and other out-of-pocket expenses mount.

Although many policies include “catastrophic” provisions that limit out-of-pocket expenses, the cut-offs are often so high that policyholders are bankrupted by the medical expenses that fall in the gap.

These radically mounting medical bills haven’t been absorbed easily by the average American family.