New Report on Medical Debt and Consumer Bankruptcy

Health-Related Bills Can Lead to Bankruptcy
What's the number one reason people file for personal bankruptcy in the U.S.?  According to a recent analysis by NerdWallet Health published in the Los Angeles Times, it's not what you might think.  Most people don't file for bankruptcy because they've lost their jobs or because they've used credit cards irresponsibly.  Rather, medical expenses lead to most bankruptcy filings in Illinois and throughout the country.  
Indeed, more than 60 percent of all consumer bankruptcies are related to healthcare expenses and medical debt.  Based on extensive data from bankruptcy filings in 2007, researchers at Harvard University published a study in the American Journal of Medicine that said, "using a conservative definition, 62.1 percent of all bankruptcies were medical."  
And most Americans who filed for bankruptcy because of medical debt might not fit certain stereotypes, either.  The researchers emphasized that most medical debtors are "well educated, owned homes, and had middle-class occupations."  In other words, medical debt can affect anyone, regardless of occupation or income level.
Consumer Bankruptcy and Health Insurance: What's the Correlation?
With the Affordable Care Act in place, many people believe that medical debt won't continue to be a serious issue in our country.  However, according to the article, "although access to health insurance can help stave off medical debt, it doesn't solve the problem."  
To be sure, approximately 10 million Americans who currently are insured are dealing with substantial medical bills that they can't pay off.  And according to the Harvard researchers, about 75 percent of medical debtors who file for bankruptcy actually have insurance.  In short, health insurance doesn't prevent all-consuming medical debt.
The Difference with Medical Debt
Why are so many financially conscious middle-class Americans struggling with medical debt?  Consumer advocates explain that medical debt is different from other kinds of debt in that most of us can't plan for it.  It's much different from the purchase of a home or a car, for which we can put away money.  However, "sudden illness and the often exorbitant cost of treatment can't be planned for."
And although medical debt accrues rapidly and without the opportunity for advance planning, creditors tend to treat it just like any other debts.  In fact, based on data collected by the Commonwealth Fund from 2010, "collection agencies targeted more than 30 million Americans for unpaid medical bills."
And even very small medical debts typically are referred to collection agencies.  Like other debts, unpaid and late medical bills remain on credit reports for seven years from the date of the original default.  The Consumer Financial Protection Bureau estimates that medical debt often "unfairly penalizes a consumer's credit rating."  
According to the Federal Reserve, more than 15 percent of credit reports contain information about a medical debt collection.  In terms of sheer numbers, that's nearly 20 million Americans who have a lower credit score due to healthcare debt.  
Contacting a Chicago Bankruptcy Attorney
Handling significant medical debts can be difficult, but an experienced Chicago bankruptcy lawyer can discuss your options with you today.  Many Americans turn to consumer bankruptcy due to healthcare bills, and it's important to have a dedicated consumer bankruptcy attorney who can help.  Contact the Emerson Law Firm today.
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