The major cause of bankruptcy in America is medical expenses which are becoming increasingly more expensive. Those who succumb to a serious illness not only have the stress of the treatment to deal with and the anxiety of their condition, but often an inability to continue working. This can deplete savings and reduce income. In most instances those who file for medical bankruptcy actually have health insurance coverage, but find it does not cover all related expenses.
The typical family has monthly debts to service. The loss of an income due to illness can result in bills piling up unpaid. Co-payments towards health insurance cover and out of pocket expenses, coupled with normal expenses, can result in an illness causing a catastrophic financial situation. The situation quickly deteriorates if the medical condition results in job loss, and with that termination of employer health insurance. Options to continue with the insurance without a job are simply prohibitively expensive.
Whilst bankruptcy is an option few want to undergo, it may be a good option in some cases. Depending on state law and which assets are protected under individual state bankruptcy laws, it could be a way of protecting the home. Many people use their home equity to pay off medical bills and then lose their home anyway as they have turned unsecured bills into a secured equity loan which they cannot afford to service. If considering if medical bankruptcy is a good option to protect ones main assets then a bankruptcy lawyer should be consulted.
Medical bankruptcy will discharge most personal debts excepting child support, student loans, taxes and alimony. It will discharge the medical bills plus other unsecured debt which has become a burden due to illness, and bring relief from the stresses of wondering how to cope with high debt and debt collectors. However it is not worth seeking medical bankruptcy if there is a chance that the bills can be repaid through negotiating with creditors or if the bills are not insurmountable.
Even when bankruptcy is filed due to medical reasons rather than irresponsibility in handling finances, it will still have a negative impact on credit. It is possible to request that the credit bureaus attach a notice of cause to credit reports stating that a bankruptcy was due to medical expenses, but no creditor is obliged to take this into account. Whatever the reason, the bankruptcy will remain a matter of public record for ten years.
In cases where medical bills are too costly to consider repaying over time, bankruptcy could well be the answer. This is particularly true if illness has resulted in the loss of income or insurance, leaving bills to accrue interest and charges. Bankruptcy should never be considered the easy option but it may well prove to be a better choice than allowing debt to impede a medical recovery due to the additional stress of monetary worries.