Medical Expenses Accounting for More Credit Card Debt
Severe injuries and illnesses can cause major changes in people's lives, but they also can create serious financial problems. Unless independently wealthy, most people are one severe illness away from being in financial ruins. While many working Americans have health insurance, it commonly is not enough to protect them from the massive medical bills caused by extended illnesses.
According to a report released by The Access Project and Demos, two non-profit organizations, nearly 60 million adults Americans are at risk of incurring unaffordable medical bills due to long term illnesses. They conducted a national survey of low and middle income households to examine the relationship between medical expenses and credit card debt. Researchers found that medical expenses directly contributed to higher credit balances. In fact, 69 percent of households surveyed reported a major medical expense in the past three years that raised their credit card debt.
With most credit cards carrying high interest rates, it is no surprise that more consumers are falling into financial straits due to medical costs.
Medical Debt under the U.S. Bankruptcy Code
Most people don't know that medical debts are considered unsecured debt under the U.S. Bankruptcy Code, meaning that there is no property (such as a house or a car) securing the debt. Essentially, medical bills are deemed to be service debt - costs and expenses accrued as a result of obtaining treatment or undergoing procedures to correct health problems. Through a bankruptcy petition, you may seek court approval to obtain a discharge, thereby eliminating your legal obligation to pay such debt.
If you are considering bankruptcy to discharge medical debt, you are certainly not alone. A 2009 Bloomberg Business report indicated that in 1981, medical debt was behind only 8 percent of all bankruptcies. In 2011, that number ballooned to 50 percent. In 2007, over 60 percent listed medical debt as the primary reason for bankruptcy protection. 78 percent of bankruptcy filers had medical insurance, but it was not enough to compensate for high medical costs.
Medical Debt in Today's Economy
Unfortunately, the specter of bankruptcy intimidates people. They will instinctively tap all available sources (especially credit cards) without realizing the options available to them. Most providers will agree to payment plans to manage debt. Nevertheless, it is important for consumers to understand their legal rights and options before maxing out credit cards and depleting retirement accounts to keep up with medical debt payments.
If you or a loved one is burdened with medical debt, a seasoned attorney can provide the guidance and information necessary to make an informed decision about bankruptcy.
At Illini Legal Services, we offer a free, no-obligation consultation to each of our clients. During your consultation, we will take the time to listen to your financial concerns and assess your case and individual situation. We have five locations to serve you. Contact us today for help!
Illini Legal Services is engaged in the private practice of law and is not a public legal aid agency. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.