The problem of medical expenses in the U.S. economy has been gradually (and sometimes not so gradually) increasing over the past 50 years.
In recent years, that growth has accelerated to the point that in 2003, medical costs made up more than 15% of the U.S. Gross Domestic Product (GDP). If we continue as expected, that percentage could grow to approximately 33% by 2040.
People who've experienced an illness or injury and found themselves buried in bills (even if they have health insurance) may consider >filing bankruptcy as a way to get out of debt.
Although people tend to have a lot of questions about filing bankruptcy, bankruptcy was created to help people resolve overwhelming bills so they can move forward.
There are two main types of personal bankruptcy: Chapter 7 bankruptcy (debt discharge) and Chapter 13 bankruptcy (debt repayment plan).
Chapter 7 bankruptcy involves the debt discharge, which eliminates unsecured debts, which are debts not tied to property, such as medical bills, credit cards, utility bills and some personal loans.
A Chapter 13 bankruptcy filing is a little different, because it involves setting up the filer on an interest-free debt repayment plan. This is generally best for people who have unsecured debt and secured debt, which is debt tied to property, such as a mortgage, that they want to keep. Chapter 13 bankruptcy has helped millions stop foreclosure, repay their debts and stay in their homes.
When you or a loved one is injured or ill, what's important is focusing on getting better--not worrying about excessive medical bills.
Talk to one of our sponsoring bankruptcy lawyers about your options:
As early as 1987, a comparative study found that more than 9 million families were spending more than 20% of their income on medical expenses.
Many middle-class Americans feel insulated from these growing costs by medical insurance, but often when serious medical problems arise, that safety net either disappears or proves to be full of holes.
For most, medical insurance is employer-sponsored. That means the insurance can disappear when illness or injury makes working impossible.
Although COBRA laws allow the employee to extend the insurance coverage by assuming payments, that solution falls short for many. COBRA can be very expensive and coverage is limited in duration, so an illness or injury that prevents work in the long-term will ultimately outlast those benefits.
Finally, even people with active medical insurance coverage often end up with large bills as co-payments, non-covered services and other out-of-pocket expenses mount.
Although many policies include "catastrophic" provisions that limit out-of-pocket expenses, the cut-offs are often so high that policyholders are bankrupted by the medical expenses that fall in the gap.
These radically mounting medical bills haven't been absorbed easily by the average American family.
In 2000, Melissa B. Jacoby, Teresa A. Sullivan and Elizabeth Warren reported that an estimated 326,441 personal bankruptcy filings in 1999 were triggered by illness or injury involving the filer or a member of his household. More than a quarter of a million additional filers had substantial medical bills.
By 2003, medical problems had emerged as the second-most-common factor in bankruptcy and data indicated that medical problems might be at the root of as many as half of all consumer bankruptcy filings.
The combination of lost income, medical bills, and a lack of insurance or gaps in the medical insurance coverage of the American middle class combine to make medical problems a leading threat to the financial security of American families today.
Unlike the largely fictional deadbeats described by the credit industry, many of these bankruptcy petitioners have struggled to make payments, taking out personal loans or second and third mortgages on their homes to cover medical bills as the expenses mounted and their incomes remained reduced.
Without a solution to the crippling level of medical debt incurred by the average American suffering a serious illness or injury, no bankruptcy reform will eliminate the crises that drive these victims into filing bankruptcy.
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