Medical Bills and Medical Bankruptcy

It has been estimated by CNN that over 60% of bankruptcies are caused by medical problems and medical bills.

My experience as bankruptcy attorney in Denver for many years is that along with credit card debt, divorce and job loss, medical problems are definitely the number one cause of chapter 7 bankruptcy filings. In fact, often times medical problems can also lead to credit card debt, divorce, and job loss and ultimately a bankruptcy filing. It is a vicious cycle.

Even people with health insurance may need bankruptcy because co-pays and deductibles for a serious injury or sickness can be overwhelming.

People often call and ask whether there is a specific bankruptcy called a “medical bankruptcy”. There is not. Usually the proper remedy is a chapter 7 filing that eliminates the medical bills along with all other debts as well.

No one knows at this point whether the Affordable Care Act (Obamacare) will change this statistic. The intent of the Act is get more people covered, but, again, co-pays and deductibles and other problems caused by medical issues may not reduce the bankruptcy filings.

This is also true for seniors on Medicare as Medicare does not cover everything, and the cost of prescriptions alone can cause seniors sometimes to incur debt that must be dealt with in a Chapter 7 bankruptcy filing.

One final note, I have noticed a significant negative relationship between debt and health. When a person is struggling with a health problem, the pressure and stress of worrying about the cost of care can make the condition worse.

While no one plans or wants to file, taking the important step of getting your financial life on track by filing chapter 7 can be a tremendous relief, allowing a person to concentrate on getting better without worrying about bills they cannot pay.