Medical debt is the reason for more than half of all the million and a half bankruptcies today, according to CreditCards.com. This is nothing new – a 2005 report in Health Affairs reported that, from 1981 to 2005, medically-related bankruptcies increased 2200%, with more than 2,000,000 Americans experiencing medical bankruptcy in 2005. And according to the survey, 75% of medical bankruptcy filers had insurance at the start of their illness! It was the co-pays, deductibles, and non-covered services that created the need for borrowing money.
As we move into 2009, medical debt threatens to become an even greater source of financial problems, because families who relied on credit cards to help pay medical costs are finding that credit is tightening. People are then delaying seeing a doctor when they’re sick, skipping recommended treatment, and not filling their prescriptions, according to Commonwealth Fund, a nonprofit foundation focused on health care issues.
As a bankruptcy attorney in Indiana, I’m seeing more and more medical debt. Not only are the stories unfortunate, I’m hearing them far too late in the process. As I’ve tried to stress in these Indiana bankruptcy blogs (see “Medical Debt Can Be Dangerous To Your Health”), it’s crucial for anyone with medical creditors to talk with an attorney as quickly as possible about his or her options. I find medical providers rarely report delinquencies directly to credit bureaus. Instead, often within just weeks of bills being overdue, they turn the debts over to collection agencies.
With legal representation, you have a chance to negotiate payment arrangements with hospitals, and other medical providers. Bankruptcy itself stops collection efforts and buys time to do some planning.
Just last year, a public policy group called The Access Project published a report on the rising number of Americans piling up debt on high interest credit cards “simply because they have the misfortune of getting sick:”
Illness and injury endanger your financial health while you’re fighting to regain physical health. Sometimes the bankruptcy safety net is the only medicine strong enough to handle the financial illness caused by medical misfortunes.