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Medical Debt is the Largest Cause of Bankruptcy: Rising Deductibles Will Not Likely Improve the Situation

For five years now, the out-of-pocket costs of healthcare have escalated rapidly. Consider a 2014 report by Forbes, where it was explained that out-of-pocket costs went up by 8 percent between just 2013 and 2014 and is expected to continue to rise. In fact, the costs have doubled since 2009. And although more Americans are covered due to the Affordable Care Act, with deductibles increasing, the out-of-pocket cost of care has become so expensive that many Americans simply choose to cut costs by avoiding needed treatment that would not be covered under their plans. According to the USA Today, four out of 10 adults reported foregoing some sort of care due to high deductibles. Therefore, it should come as no surprise that medical debt has remained for many years the leading cause of bankruptcy.

Bankruptcy is not a moral failing; it is a national crisis

According to reports by the American Bankruptcy Institute, the statistics suggest that nearly 800,000 bankruptcy cases have been filed so far in 2015 alone. This number is staggering, but it suggests that bankruptcy does not just affect a small, isolated number of people who made bad credit decisions. Instead, it suggests that the problem is far more widespread than many people understand, and it affects families and corporations across the country.

Medical debt can be discharged through bankruptcy

For those weighed down by the soul-crushing enormity of medical bills and collections, there is hope. Under both Chapter 7 and Chapter 13, there are ways to either eliminate the debt entirely or to restructure it for a portion of it to be repaid in time. However, unlike secured debt like homes and vehicles, medical debt is one of the easiest debts to discharge in bankruptcy. For those who have little assets and meet the means test, Chapter 7 may be the most straightforward way to unchain oneself from the shackles of accrued medical debt.

Alternatives to bankruptcy

When it comes to medical debt, one should keep in mind that there are other options short of bankruptcy. With the high number of bankruptcies and the fact that medical bills are not attached to anything – they are unsecured – a lot of hospital billing departments and providers’ offices are now willing to work with consumers to rearrange the debt, settle it for less than owed, or even reduce monthly payments to very nominal amounts with no interest. Some clients may be able to negotiate a $10,000 bill to a $25 per month payment. Granted, no one wants a debt hanging over his or her head for 30 years, but if income is expected to increase, there may be other, less drastic measures, to at least minimize the damage to your credit.

If you have been saddled with medical debt for years and want to learn about your options, a meeting with experienced Orlando bankruptcy lawyer Amy E. Goodblatt will give you the knowledge and peace of mind you need to find the quickest path to financial recovery and security.

GOODBLATT · LEO is located and serves clients in and around Orlando, FL.

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