Most people think of bankruptcy as something that happens to those who are not careful with their credit card debts, but the truth is that bankruptcy can happen to anyone, regardless of their credit use, if they suddenly face an unexpected and expensive medical situation. Could medical bankruptcy happen to you? Statistics say that it could. In fact, medical costs contribute to over 60 percent of all bankruptcies in the United States.
This is an increase of over 50 percent through the past decade, and most who file are middle-class homeowners who have a decent education, but fall upon hard medical times. That, coupled with the changes in the medical community and the economic situation we are in, makes a long illness difficult to overcome.
When illnesses are long and cost a lot, private insurance, however great it may be, may not be sufficient to cover the costs. In 2007, a study of over 2,300 bankruptcy filers found that over 62 percent of those who filed did so because they either had more than $5,000 in medical bills or because one member of the household lost significant income due to the illness, which caused them to fall behind on their bills.
Many may assume that having medical insurance is a protection against this possibility, but that is not necessarily the case. In the study, the average out-of-pocket expenses for the families filing bankruptcy was $17,943, even with insurance coverage. The costs were more for non-insured, but it didn’t appear to matter, as the $17,000 was simply out of reach for the average family. Gaps like co-payments and deductibles and services that were not covered made this difference.
So what does this mean for the average individual? Is there any way to protect oneself from the potential of filing bankruptcy after a significant medical event?
The truth found in these findings is that relying on medical insurance alone to cover medical expenses may not be sufficient. If you have a plan with a high deductible or the potential for gaps in coverage, you may want to start making plans to set a substantial amount aside for the potential future medical bills you might face. Consider options like disability insurance to ensure that you are not without income if your main wage earner gets sick.
The good news, however, for those facing medical bills is that bankruptcy is an option to help, and because it is, they have a way out of their stressful financial situation. While bankruptcy may not be a positive experience, it is also not the end of the world for many consumers. High medical bills do not have to be the end of your financial future. Bankruptcy laws allow you a way out without destroying your family and losing everything you hold dear.
If you are considering this route, you may wish to talk to a bankruptcy attorney to see what the consequences will be, but remember that this is a viable option when you are facing high medical bills.
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