Many cultural attitudes about bankruptcy reflect widespread misinformation. People tend to think of those who file for bankruptcy as irresponsible, but that is often not the case. While there are some people who misuse credit cards and use bankruptcy to shirk responsibility for their finances, most people who file for bankruptcy have been diligent and responsible throughout their lives.
However, all it takes is a personal medical emergency to leave someone with so much debt that they cannot reasonably imagine repaying what they owe. A significant portion of the people who file for bankruptcy every year do so because of medical debt. Approximately 100 million Americans have a significant amount of medical debt to address, and many of them do not have the resources to pay what they owe.
Especially if people have health insurance, they may take for granted the idea that whatever treatments they require they can receive at minimal expense. All it takes is a serious injury or illness in some cases for people to end up in need of debt relief.
Health insurance doesn’t pay for everything
Anyone who has looked closely at the fine print of a health insurance policy is likely aware of the limitations on coverage. For example, insurance companies generally require that people pay a deductible that may be thousands of dollars before they qualify for coverage.
Even then, they may need to cover co-pays every time they see a doctor or pick up medication from a pharmacist. They may also be responsible for coinsurance. Someone who has to pay 30% of their care costs if they enter the hospital through an emergency room could have massive medical debt after one single incident.
There is also the possibility of someone needing medical care while they are out of network. Most health insurance policies only cooperate with certain physicians and facilities. Anyone who travels regularly could be at risk of having large uncovered medical expenses.
Medical creditors are often aggressive
Contrary to what people expect, hospitals and other medical creditors are often very assertive about demanding payment. Many hospitals have their own collection departments that make daily phone calls and take legal action with minimal provocation. Healthcare providers are also likely to sell debts to third-party collection companies that initiate lawsuits and engage in aggressive collection activity.
There is nothing immoral or irresponsible about realizing that medical debt amounts to more than someone can expect to repay. Filing for personal bankruptcy can halt collection activity and may lead to the discharge of someone’s debt. A successful personal bankruptcy filing could potentially eliminate medical debt and other financial obligations that put pressure on someone’s household budget. Exploring different options for debt relief may help people realize how powerful and useful a bankruptcy could be.