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Medical debt causes bankruptcies.

A recent study completed by Harvard University that took a look at medical debt and bankruptcies shows a very large increase over the last six years in personal bankruptcy filings that are caused in large part by ever-higher medical expenses. There are many more households that are struggling to pay down their medical bills or eliminate debts they owe to doctors or hospitals.

The results of the study show that medical debts and bills, when taking in combination with the problems that result from illnesses such as lost wages for the sick and their caregivers, has contributed to over 60% of all personal bankruptcies filed in 2007.

The fact of the matter is that medical insurance isn't much help either. The Harvard study goes on to show that about 80% of bankruptcy filers did have health insurance, but they are still struggling to keep up with the ever escalating costs of health care. Only 20% of those who filed bankruptcy did not have insurance.

It is important to note that medical expenses were not the only cause for these bankruptcies, but the study does show them as being an important, contributing factor. The increase in the bankruptcy filings occurred despite a 2005 federal government law that was put into place making it more difficult for individuals to seek court protection from creditors for debts, including medical expenses.

File bankruptcy if have health insurance

Those that declared bankruptcy and that had private insurance had average medical bills of almost $18,000. Compare that to people who filed for bankruptcy without any health insurance. They had medical expenses of almost $27,000. Many of these people put their bills on their credit cards, which will often have a very high interest rate associated with them. Find ways to eliminate medical and credit card debt.

The majority of the people who filed medical expense related bankruptcies were middle class before an illness hit. But when they became sick, this caused a financial disaster. Two-thirds were homeowners, and most had gone to college and had a degree.

If you look at certain medical conditions, those individuals who sought help from a bankruptcy filing and that had neurological disorders and diabetes, including multiple sclerosis, had the highest amount of medical debt due. The amounts averaged $27,000 for those with health insurance and almost $35,000 for those without insurance. For these and other cases, hospital bills were the largest type of medical expense for about half the families that filed health care related bankruptcies.





One of the conclusions of the study was that health insurance does not necessarily help. Having this coverage is not a guarantee that a sickness won't bankrupt a person. The primary reasons being that lots of health insurance comes with deductibles, big co-payments, and high priced uncovered services. So many people find themselves insured and still end up with big medical bills.

Get help to prevent bankruptcy from medical debts

The fact is that many hospitals, doctors, and medical professionals will not purse unpaid bills as aggressively as other creditors. Two big reasons include aggressive collection tactics by a medical provider, in particular a non-profit facility, is bad publicity for the hospital. A second reason is many doctors just do not devote as many resources towards debt collection.

This means that consumers often have time on their side as the debt may not be collected as aggressively. They may have other options available to them other than filing bankruptcy. Patients should first look into non-profit credit counseling agencies, which will take a holistic approach to dealing with medical bills and all of the other debts that someone has. They will also advise a consumer on the pros and cons of a bankruptcy filing and provide other support. Learn more on credit counseling agencies and the services they can administer.

By Jon McNamara

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