No one wants to admit the water is over their head. It’s difficult to say to yourself, let alone family and friends. But when you’ve faced a medical emergency, the bills can become overwhelming. Far too many Americans use their savings and retirement funds to pay medical bills, only to have them become more than they could ever hope to pay back. This is why medical bills have become one of the top causes of personal bankruptcy in the U.S.
Our Cleveland bankruptcy attorneys have worked with many individuals and families struggling under the weight of medical bills. When a medical bankruptcy is the right path for you, we’re here to be your guide.
The Link Between Medical Debt & Bankruptcy
Many studies have looked into the underlying cause of personal bankruptcies. But it’s difficult to gain an accurate picture. Because you aren’t required to provide a reason for filing for bankruptcy, studies are based on individual surveys. Not surprisingly, the number of bankruptcies caused by medical debt is significant.
Some studies found medical bills caused 26% of bankruptcies, The Balance reported. Other studies believe the percentage is much higher. A study published in The American Journal of Medicine (in which one of the researchers was Senator Elizabeth Warren) found 62.1% of all personal bankruptcies were brought on by medical bills in 2007.
Why is Medical Debt So Insurmountable?
Several issues can lead to more medical debt than a person or family can hope to repay. Rare and serious diseases, including cancer, tend to require on-going and expensive care. A medical emergency, like a car accident, could lead to multiple severe injuries that require significant immediate care, such as surgeries, and on-going treatment.
Losing your job compounds the cost of injuries and illnesses. If you’re seriously hurt in a wreck or going through chemotherapy and radiation, it’s impossible for you to work. In the study, 40.3% of people lost income due to their illness.
Medical Debt Affects Everyone
Medical debt overwhelms people of all incomes and occupations. It’s not something that impacts only people with a lower socioeconomic status or those without insurance. The study found 78% of those who filed bankruptcy because of overwhelming medical expenses had some form of health insurance. Most were well-educated, owned their homes, and had what are considered middle-class jobs.
Medical Costs Continue to Rise
There’s no end in sight to medical bankruptcies throughout the U.S. as medical expenses continue to increase. Total national health expenditures reached over $3.6 trillion in 2018, according to the Peterson-Kaiser Health System Tracker. Per capita spending rose significantly. In 1970, health care costs per capita were $355. By 2018, costs per capita were $11,172. Out-of-pocket expenses also grew. In 1970, a person spent about $119 on health care. By 2018, this amount rose to $1,150.
Rising health care costs and spending wouldn’t be bad news if inflation kept pace, but it hasn’t. Since 1980, health expenditures have grown faster than the Personal Consumption Expenditure Price Index, according to the Health System Tracker. A study by Health Care Cost Institute found healthcare prices increased approximately 16% between 2012 and 2016—three times the rate of inflation.
Are Your Medical Bills Too Much?
If you can’t make the minimum payments on your bills each month because of medical expenses and your debt continues to grow, talk with our experienced and compassionate attorneys about your options.
Bankruptcy is a legal process that allows you to either eliminate or restructure debt. The former is Chapter 7 bankruptcy and known as liquidation. The latter is Chapter 13 bankruptcy and is called reorganization. Which type of bankruptcy you should file for depends on your circumstances and whether you qualify for liquidation.
Fortunately, in either type of bankruptcy, medical debt can be eliminated. As long as you’re eligible for Chapter 7 bankruptcy, there’s no limit to how much medical debt the court can discharge. If you go through Chapter 13, you’ll repay some of your medical debt over a three- or five-year payment plan. But the court discharges any remaining medical bills when you complete your payments.
There are pros and cons to each type of bankruptcy. Chapter 7 is best suited for individuals with little-to-no income. If you have a steady job and want to keep as much of your property as possible, then Chapter 13 might be best.
Our Cleveland Bankruptcy Attorneys Are Here to Help
Whether you’ve decided to file for bankruptcy or simply want information on your options, contact Luftman, Heck & Associates. Our experienced Cleveland bankruptcy lawyers will talk with you about your income, the property you own, and how much debt you have. We’ll advise you on whether bankruptcy might be the right option for you, and if so, whether you might be eligible for Chapter 7.