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Did your medical expenses exceed your emergency funds?

Academic research reveals that medical debt is a leading reason for seeking bankruptcy protection.

Most families have many places to put their money and may lack the funds needed for a medical emergency.

Joining the club

If you are considering bankruptcy because of overwhelming medical expenses, you are not alone: Two-thirds of those who file for bankruptcy say a medical issue was the reason for their decision. Although it seemed the Affordable Care Act would improve the situation, academic research indicates that the ACA has not reduced the medical debt with which families are struggling, nor has it reduced the number of bankruptcy petitions. In fact, in the years since the ACA began, the problem of high medical costs has increased as a factor in bankruptcy decisions: 67.5% as compared with 65.5% before the ACA opened.

About the research

Hunter College research showed that the healthcare insurance most people carry, or that companies provide to their employees, is not adequate to cover the treatment needed for illnesses or conditions, some of which may require very expensive long-term care. Unless they are very wealthy, most people cannot afford better insurance coverage.

Not enough saved

Setting aside money for emergency use is a luxury for many people. A separate study found that only 40% of people in America have $1,000 saved in emergency funds. Even so, out-of-pocket medical costs could sap that amount of money in a short period of time.

What to expect

You may find yourself the target of collection agencies calling you or sending bills on behalf of doctors and hospitals. Trying to cope with the unrelenting demands is understandably stressful. However, bankruptcy is an option for you, a sensible solution for getting out from under overwhelming medical debt. Even with bankruptcy, you will have options. For example, you can use Chapter 7 to discharge your debt while Chapter 13 provides you with an affordable monthly payment plan. Either may help you enjoy a brighter financial future and the ability to start another emergency fund that you can use for something other than medical bills.

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