Social stigma around bankruptcy makes many people delay filing for bankruptcy when they might otherwise benefit from financial relief. People struggling with high levels of debt or a sudden drop in their household income may not be able to correct their financial challenges without support.
Bankruptcy prevents collection activity that can worsen someone’s financial circumstances, including creditor lawsuits. Bankruptcy can also help someone discharge some of their debts, allowing them to regain control over their budget. And, despite how people often associate bankruptcy with irresponsible choices, the reality is that the most serious financial issue reported by many people who file for bankruptcy is technically outside of their control.
Medical debt contributes to a majority of bankruptcy cases
According to information about financial stressors provided by those who have filed for bankruptcy, almost three-fifths of those seeking personal bankruptcy relief have medical debt that added to their financial stress. A majority of adults in the United States have medical debt, and more than a fifth of all adults have $10,000 or more in medical debt.
Even higher-earning people with health insurance could end up facing medical debt. People have no control over when they might end up hurt due to a car crash or diagnosed with cancer. In some cases, people may have medical conditions that require treatment that their insurance doesn’t cover.
Other times, they might have medical emergencies far from home where no insurance assistance is available whatsoever. Local treatment for covered medical conditions can still lead to major medical debt if someone’s policy includes co-insurance obligations.
People cannot control their health or the medical care that they might need in an emergency. Once they finish treatment, they cannot control how aggressive a hospital or other medical creditor becomes about collecting on the balance due. It is often a creditor lawsuit that makes someone with significant medical debt finally file for personal bankruptcy.
Removing the stigma and guilt people often feel when contemplating filing for bankruptcy might help them embrace the idea of discharging their debts and putting an end to aggressive collection efforts. A personal bankruptcy filing is often the most effective solution for those dealings with high levels of medical debt and other challenging financial responsibilities.