Medical Expenses Often Lead to Bankruptcy

A number of New Jersey residents struggling in this tough economy have chosen bankruptcy as a way to deal with financial problems. Bankruptcy filers might be stereotyped as irresponsible overspenders, but many people who turn to personal bankruptcy are the victims of bad luck in the form of an expensive illness. According to the Centers for Disease Control and Prevention, in 2011 one in five American families faced problematic medical bills they could not readily pay.

Excessive medical bills are even more likely for women. A report from the Commonwealth Fund states that 26 percent of American women had trouble paying medical bills in 2009 and 2010. In other parts of the world, the problem was far less acute; for example only four percent of German women reported that medical bills were a problem. However, health care reform in the United States is likely to improve the American numbers, according to the Commonwealth Fund.

The Commonwealth report also noted that women are charged more than men for the same policies, use more health care, and have lower incomes. The report concluded that the number of women with inadequate or no insurance in the U.S. totals 35 million.

The consequences for an individual who is not covered by health insurance can be financially devastating if serious illness strikes. Like many Americans who take risks to further their careers, one young woman featured in an article by NBC News opted for an insurance plan that covered only catastrophic events after she left a job to become self-employed. At age 31, she was diagnosed with breast cancer.

During treatment, she was compelled to pay $1,000 up front for the costs of surgery, and ended up being responsible for $70,000 in total medical costs. This young woman did not opt for bankruptcy, but instead has been paying off the debt slowly, still owing $10,000 eight years after her illness.

Too often people in similar situations overlook debt renegotiation or bankruptcy as options to their financial distress. Depending on the circumstances, personal bankruptcy may help an individual with significant medical debt through the complete or partial discharge of debt or through an approved repayment plan. Bankruptcy is not a permanent black mark that ruins a person's credit forever. Usually a bankruptcy filer can obtain a secured credit card soon after filing, with a chance for a regular credit account as soon as six months to a year afterward.

Each individual's financial stress is different, and bankruptcy may be the best choice. Consulting with an experienced bankruptcy attorney will help an individual decide whether filing for bankruptcy is appropriate.