The LA Times reports today on a Harvard study that shows medical bills played a role in 62 percent of all bankruptcies filed in 2007, a seven percent increase compared with 2001.

What's more, many of the people filing bankruptcy due to overwhelming medical bills had health insurance. From the LAT:

Medical insurance isn't much help, either. About 78% of bankruptcy filers burdened by healthcare expenses were insured, according to the survey, to be published in the August issue of the American Journal of Medicine.

"Health insurance is not a guarantee that illness won't bankrupt you," said Steffie Woolhandler, one of the authors, a practicing physician and an associate medical professor at Harvard.

It's not just high medical bills that contribute to bankruptcy, but also the lost wages and work time that an injury or illness can cause.

There is sometimes a stigma assocaited with filing bankruptcy, the idea that bankruptcy filers are irresponsible with their money. But this study shows:

Most people who filed medical-related bankruptcies "were solidly middle class before financial disaster hit," the study says. Two-thirds were homeowners, and most had gone to college.

Even if you plan for the unexpected, a sudden injury or illness can hit hard. Lost work time can cause your income to dry up, while extremely high medical bills turn a small, manageable amount of debt into an out-of-control giant.

Filing Bankruptcy and Medical Bills

For bankruptcy purposes, medical bills are considered unsecured debt.

This type of debt may be entirely discharged in a Chapter 7 bankruptcy filing.

In a Chapter 13 filing, your medical bills could be ordered and combined with other debts, and possibly reduced, in a bankruptcy trust.