My Online Debt Solutions

Bankruptcy, Medical Bills, and the “Emergency” Credit Card

Bankruptcy and medical bills; you could say the two terms literally go hand in hand these days. It’s amazing when you take a moment to stop and really look at the numbers. Take into account that we are heading for a record-breaking bankruptcy year, it’s extremely difficult to ignore the fact that “something’s gotta give.”

According to CreditCards.com, we are on a fast track to filing 1.4 million bankruptcies this year. We’re already at over 1.07 million, and the number is climbing very fast. Wrap this number around your head; 6,000 bankruptcies are being filled every month nationwide! With the Credit Card Act changing the game of the credit industry, and the unemployment rate at around 10% nationally, and health insurance companies taking advantage of everyone, it really shouldn’t be a surprise that bankruptcy numbers are through the roof.

Sure, consumers are learning how to budget more efficiently. We’re also learning how to keep food on the table and make more than the minimum on the credit card during these rough economic times, but it’s not enough to keep medical expenses down and avoid the inevitable illness and accidents. That’s why lobbyists, legislators, and politicians, as well as hard-working consumers, are taking up the charge and asking for a change in the bankruptcy system.

According to the Associated Press, the proposed changes would look like this:

• Waive the means test and credit counseling requirements.
• Allow debtors to protect their homes from creditors, with an exemption of $250,000.
• Give debtors the option of paying attorneys fees when they are on firmer financial ground after completing the bankruptcy.

People file for bankruptcy for many different reasons. The most common would be divorce, credit card debt, and medical bills. Recent numbers have shown that of the millions of bankruptcies filed in 2007, 62% of them were due to medical related issues. Of that number, over 70% of those consumers already had medical insurance, but it wasn’t enough to keep them above water.

Let’s stop and think about this for a moment. If we are on track to rack up 1.4 million bankruptcies this year alone, and 62% of them will be medically related, that’s almost 870,000 people who will be so devastated by medical debt that they will have to file for bankruptcy. If that doesn’t put things into perspective, I don’t know what else will.

Here’s where it gets interesting. If you have to get a transplant, and your insurance is only willing to cover $10,000 (which I overheard was in fact a reality for a local Arizona couple who had insurance) how much is coming out of your pocket? In reality, how much is coming out of your credit balance as well, and then your home, and then anything else that you can get money from to simply stay alive?

Most patients who are dealing with a medical emergency cannot work, thus they can’t pay their bills. In these situations, credit card debt piles up so quickly, and the creditors start harassing so aggressively, that any thought of staying relaxed and in a healthy state of mind is nearly impossible. When you’re stressing about your mortgage and credit card debt, and considering bankruptcy as an option, how are you going to get healthy? Tack onto that your medical expenses that your health insurance didn’t cover and you’ve got some serious problems.

Currently, bankruptcy is bankruptcy, and whether you are filing due to a divorce, credit card debt, foreclosure, or medical expenses, it’s all the same. The bankruptcy code “does not distinguish between debtors driven into bankruptcy by medical bills and those who become insolvent through poor planning or reckless spending.” (DelawareOnline.com) That is why a subcommittee was held this week to discuss the proposed changes. Hopefully a decision will be made soon.

If you’re considering bankruptcy, you might want to give us a call first, or one of our partners.  1-877-386-3603 We can discuss your options and how to get you out of debt without turning to bankruptcy.