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Are you one of many facing in medical debt? Bankruptcy may help

On Behalf of | Sep 3, 2021 | Bankruptcy |

Some illnesses, like the common cold, are easy to shake off. We rest a few days and then get on with our lives. Other illnesses, like pneumonia or cancer can take much longer to recover from and often require intensive medical care. And, some illnesses take the form of chronic conditions such as heart disease or diabetes that require life-long care.

What has come to the forefront of our attention as of late is the high cost of medical care in the U.S. People are going into significant debt just to obtain the care they need to recover their health or even save their life.

How big is the medical debt crisis in America?

A study published in JAMA reports that as of June 2020, the total amount of unpaid medical debt currently in the collections process totaled a whopping $140 billion. This is currently the highest source of debt currently in collections in the U.S.

Of those studied, a sample size of almost 33 million respondents had on average $429 in medical debt as of June 2020. This is down from the average amount of medical debt following the Great Recession. In 2010, the average amount of medical debt amounted to $827.

Much of this debt is concentrated in low-income areas, the South and in states that declined Medicaid expansion coverage through the Affordable Care Act. New Jersey did expand Medicaid under the Affordable Care Act, but many other states did not. In fact, medical debt fell 50% in states that expanded Medicaid. However, states that declined Medicaid expansion saw only a 10% decrease in medical debt.

How can filing for bankruptcy help you address medical debt?

Medical debt is an unsecured debt, but it is still a type of debt that in many cases can be discharged by filing for bankruptcy. In a Chapter 7 bankruptcy filing a person’s assets are liquidated and the proceeds used to pay back their creditors. At the end of the Chapter 7 bankruptcy process many remaining debts will be discharged. In a Chapter 13 bankruptcy filing a person enters a three- to five-year repayment plan. At the end of the plan many remaining debts will be discharged. The bankruptcy process gives debtors a chance to move forward on fresh financial footing.

Learn more about your options if you are facing overwhelming medical debt

It is incredibly stressful to face medical debt that you simply cannot pay back. At a time when you should be able to focus on healing you may instead be facing calls from debt collectors. When this happens, you will want to explore all your options for debt relief, including the possibility of filing for bankruptcy.