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The top cause of bankruptcy: Medical debt 

On Behalf of | May 24, 2022 | Bankruptcy

There are a lot of myths about bankruptcy, with the most prevalent likely being the fact that people who declare bankruptcy have made financial mistakes and put themselves in this position. It is often assumed that they racked up too much debt on their credit cards and bought things they didn’t need, so their debt is their own fault.

What you’ll find if you actually look at the statistics, though, is that bankruptcy more often happens because of things that are entirely outside of people’s control. For instance, the top cause of bankruptcy in the United States is often noted as medical debt. Someone who has developed a serious illness or who has been injured can’t pay their medical bills and has to declare bankruptcy to have any hope of rebuilding their credit.

What if you have insurance?

You may assume that you would never have overwhelming medical debt if you carry insurance, but this is not always the case. For one thing, you have to consider your deductible. If the deductible is $5,000, that alone could be overwhelming debt depending on the rest of your financial situation.

You may also find that your insurance doesn’t cover all of the costs that you have. People often have issues with getting treatment from doctors and other service providers who are technically not in their network. These individuals have no idea that they’re getting out-of-network treatment when they’re in the hospital, but they only find out about it when the insurance declines to cover the costs and they get the bill. You may think that you are fully covered and then suddenly get a bill for $20,000, for instance, so it’s easy to see how this type of surprise bill could make you consider bankruptcy.

Bankruptcy is a useful tool

The key is to remember that bankruptcy is a financial tool. Don’t worry about the reasons for the bankruptcy or where the fault lies. This is simply a financial tool that’s been built into the system to give relief to those who need it. If you believe it would help you in your current financial situation, then you need to know exactly what options you have.

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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 23 years.