The link between medical debt and bankruptcy

Though more Americans have health care insurance now, medical debt is still a serious issue for many people in Illinois and across the country. In fact, a study from NerdWallet last year revealed that medical expenses are the most significant cause of filing for personal bankruptcy.

The prevalence of the problem is widespread. The Commonwealth Fund issued a report that stated roughly 40 percent of Americans are indebted to collection agencies for medical bills. Further, the organization surveyed 11 countries and found that Americans are more likely to struggle to pay bills than citizens of other developed nations.

Part of that reason, experts say, is that people receive bills that are higher than they expected. In some cases, those exorbitant costs may be explained by billing errors. Further, people in different parts of the country may pay significantly more for a procedure than their counterparts living in another area. For example, NerdWallet found that people in California paid $291,000 for an inpatient stay related to severe intestinal bleeding. Patients in Arkansas paid just $5,400 for the same procedure.

No matter the circumstances, the outcomes of struggling with medical debt are real and damaging. For example, NerdWallet points out the following: 

  •        More than 25 million adults will forgo taking medications in order to save money.
  •        More than 15 million adults will eat through their savings accounts to pay off medical debt.
  •        Roughly 1.7 million people are living in a home that will end up filing for bankruptcy as a result of the medical bills.

Medical debt is considered unsecured debt, which often means that filing for bankruptcy will either discharge or reduce it. A Chapter 7 filing will likely eliminate the debt, and a Chapter 13 debt will group the medical bills into the repayment plan.

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