Personal bankruptcy filing rates have increased significantly over the past 25 years, with an unexpected impact on revenues being the primary cause. However, economic, legal and institutional factors such as increased consumer debt, reduced savings, reduced costs of filing bankruptcy, and greater access to credit have likely contributed to the pattern of bankruptcy rates over the past century. Kimberly Amadeo is an expert in the US and global economies and investments, with more than 20 years of experience in economic analysis and business strategy. She is the president of the economic website World Money Watch and a writer for The Balance, providing information on the current economy as well as past events that have had a lasting impact.
Medical bills are reportedly the number one cause of bankruptcy filings in the US, with one study stating that 62.1% of bankruptcies were due to medical problems and another claiming that more than two million people are adversely affected by their medical expenses. It is difficult to determine the true impact of medical expenses due to different interpretations of study results. What is known is that many people are so affected by health care debts that they need to file for bankruptcy. Estimates have varied in the past due to the timing of studies conducted, different methods used, how results were interpreted, and why results were used.
Spin is a concept that involves using information in a way that benefits the presenter or parties associated with them. The information presented in studies such as those mentioned above can be manipulated in such a way that it appears worse than it actually is, even though it may not be good. Researchers disagree on evidence that medical bills cause bankruptcies. The biggest problem in answering this question is that those who file for bankruptcy are not required to state the reason. As a result, estimates are based on surveys and will depend on how researchers formulate their questions and how respondents define the cause of their bankruptcy.
A variety of factors can lead to bankruptcies. Many people with medical debts also have other debts, lower incomes, few savings, or have lost a job. Medical debts are generally unexpected: many Americans live paycheck to paycheck due to the cost of living, low salaries, or living beyond their means. A sudden medical bill can wreak havoc on the financial lives of struggling people. Nearly a third of those surveyed by the KFF stated that they did not know that a particular hospital or service was not part of their plan and one in four found that their insurance had denied their claims. There are many reasons why people file for bankruptcy; medical expenses do have an effect on people's financial situation, causing some financially responsible individuals to file for bankruptcy. For others, spending is the last push to overcome the financial cliff they were going through.
The debate about medical expenses causing bankruptcies will continue to occupy a place on political platforms, around dinner tables and in academia in the near future. Politicians will continue to roll out numbers to get votes they need; however, it is undeniable that a large number of people in the US are influenced by medical expenses to file for bankruptcy. Medical debt will remain on your credit report as long as it is correct and the account is open; once closed, negative information should disappear from your credit report within seven years. If you file for bankruptcy, it can stay on your credit report for 10 years. NerdWallet Health finds that medical bankruptcies account for most personal bankruptcies. Medical debt as a cause of consumer bankruptcy; Peterson-KFF Health System Tracker; The burden of medical debt in the United States; Consumer Financial Protection Office; How long does negative information stay on my credit report? TransUnion; Equifax, Experian and TransUnion back US consumers with changes in medical collection debt declarations. Medical expenses can add up quickly and many patients realize they simply cannot afford them.
In fact, medical expenses are among the top reasons for filing for bankruptcy; interestingly enough, not everyone who filed for bankruptcy under Chapter 7 citing medical expenses lacked insurance - approximately 72% had some form of health insurance. If a company does not prosper it often results in reduced costs which can sometimes include wage cuts for employees; if you cannot find other ways to compensate for lost income your only option may be to file for bankruptcy. Contrary to popular belief not all credit card debt is due to lack of responsibility with money - if you're struggling and cannot afford to use money from your bank account to pay for what you need (food, basic necessities, medical expenses or other emergencies) you may turn to your next alternative - credit cards. Accumulating debt along with extremely high interest rates can quickly force you into seeking help from a bankruptcy lawyer; sometimes you can incur crippling debts as a result of overspending - whether due to inflation or poor budgeting skills or simply because you don't pay attention to what you spend it can still cause you to fall quickly. While it's recommended to have a few months' salary saved in case of an unexpected emergency not everyone can afford this - emergencies can happen at any time - an appliance could shut down or your car could break down causing structural damage - whatever the reason even if you have an emergency fund saved these emergencies can have catastrophic financial consequences. The increase in personal bankruptcies during 1920s and 1930s together with increasing corruption and legal challenges related to business bankruptcy filings during Great Depression prompted passage of...
