People are typically forced to file for bankruptcy due to a combination of financial setbacks, most of them unexpected. Job loss, medical expenses, and unaffordable mortgages are some of the most common causes. Health insurance is a complicated and frustrating aspect of life, and often an unexpected medical problem that isn't covered or treated like the dreaded “pre-existing” condition will cost the family thousands and thousands of dollars in unexpected expenses. Bankruptcy is often the only way out for these people who drown in medical debt, especially for young people in their twenties with healthy lifestyles who suffer a catastrophic injury or illness.
Divorce and separation are also very costly, and when one partner bears most of the debt, the burden of debt can quickly become unmanageable. An analysis of the Consumer Bankruptcy Project revealed that only 13% of debtors filed for bankruptcy protection due to excessive credit card spending or poor investments. The vast majority of filers simply suffered one of the three above-mentioned fates. Personal bankruptcy filing rates have increased dramatically over the past 25 years. An unexpected impact on revenues is the predominant cause of bankruptcy filing.
However, over the past 100 years, economic, legal and institutional factors (increased consumer debt, reduced savings, reduced costs of filing bankruptcy, and greater access to credit) are likely to have contributed to the pattern of bankruptcy rates. Medical bills are reportedly the number one cause in the US. A study has stated that 62.1% of bankruptcies were due to medical problems. Another states that more than two million people are adversely affected by their medical expenses. It's hard to know what the real impact of medical expenses is with so many different interpretations of the study results.
What is known is that there are many people who are so affected by health care debts that they need to file for bankruptcy. Estimates have been different in the past due to the timing of the studies that were conducted, the different methods, the way in which the results were interpreted, and the reasons why the results were used. Turning is a concept that consists of using information in a way that benefits the presenter or the parties associated with the presenter. The information presented in studies such as those mentioned above can be manipulated in such a way that the information, although not good, seems much worse. 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, the estimates are based on surveys. Therefore, the answer will depend on how researchers formulate their questions and how the respondents define the cause of their bankruptcy. A variety of factors cause bankruptcies. Many people with medical debts also have other debts. They may also have lower incomes, few savings, or have lost a job.
Medical debts are generally unexpected: Many Americans live paycheck to paycheck because of the cost of living, low salaries, or living beyond their means. A sudden medical bill wreaks havoc on the financial lives of struggling people. Nearly a third of those surveyed by KFF stated that they did not know that a particular hospital or service was not part of their plan. One in four found that their insurance had denied their claims. NerdWallet Health finds that medical bankruptcies account for the majority of personal bankruptcies.
Poor conditions in the economy in general and in the specific market in which a company operates are common causes of bankruptcy. The economy tends to follow a boom-bust cycle of rapid expansion followed by periods of calm or recessions. The increase in personal bankruptcies in the 1920s and 1930s prompted Congress to pass The Chandler Act in 1938 which encouraged bankruptcy by increasing federal exemptions for personal property. Despite all this, 66.5% of all bankruptcies are related to medical problems either because of expensive medical bills or time away from work according to Lorie Konish from CNBC citing a study from American Journal Of Public Health.
Medical debt will remain on your credit report as long as it's correct and the account is open. Once it's closed negative information will disappear from your credit report within seven years if you don't file for bankruptcy which can stay on your credit report for 10 years. The debate about medical expenses causing bankruptcies will continue to occupy a place on political platforms, around dinner tables and in academic circles in near future as politicians will continue to roll out numbers to get votes they need. What is undeniable is that a large number of people are influenced by medical expenses to file for bankruptcy in United States.
