One of the main reasons that people in America are in debt is due to medical emergencies and medical treatments that are extremely costly. A broken arm, for example, could result in thousands of dollars in emergency care, X-rays, physical therapy and follow-up visits.
While many people do have insurance, insurance is not a guarantee that they won’t have debt following an injury or illness. In fact, many people have deductibles in the thousands, if not tens of thousands, of dollars, which means that they have to pay that out of pocket regardless of what the insurance company covers.
Americans are often bankrupted by medical debt
According to the Journal of the American Medical Association, Americans owe around $140 billion in medical debt that has already gone to collections as of June 2020. Previously, the Journal had suggested that the estimate was $81 billion. This shows a huge discrepancy in the perceived debt versus the debt that Americans really deal with.
Many people who end up in debt, around 18%, are pursued by creditors. Some people in debt may not yet have gone to collections over those debts due to placing them on credit cards or taking out loans.
When medical debt is excessive, bankruptcy may help
When your medical debt is high, bankruptcy may help you get out of debt and stay out. With bankruptcy, unsecured debts, which are debts like medical debts and credit card debts, may be able to be discharged. If so, you won’t owe anything else on those debts.
There are two main kinds of bankruptcy for consumers, Chapter 7 and 13. Chapter 7, liquidation bankruptcy, allows you to eliminate debt by liquidating assets. In most cases, people retain many of their assets through exemptions.
With Chapter 13, you renegotiate debts and pay on them for three to five years. After that, any remaining qualifying debts are discharged. This may help you eliminate medical debt in a reasonable timeframe.
Bankruptcy isn’t for everyone, but it does have the potential to help you. It’s worth looking into, so that you can understand your rights by law.