In the complex landscape of personal finance, one issue stands out as a common and devastating problem: medical debt. Healthcare costs in the United States are often exorbitant, leaving many individuals and families struggling to manage their medical bills.
As a result, medical debt has become one of the top reasons people file for bankruptcy.
Why medical debt is out of control
The rising cost of health care is a significant factor contributing to the burden of medical debt. Hospital stays, surgeries, prescription medications and even routine check-ups can quickly accumulate, leaving patients with large bills to pay. For many, these costs are unmanageable, especially when unexpected medical emergencies arise.
In some cases, individuals may have health insurance. However, the coverage may be insufficient to address the full scope of their medical needs. High deductibles, co-pays and coverage limitations can leave people with substantial out-of-pocket expenses, adding to their financial strain.
What bankruptcy does
Filing for bankruptcy can be a lifeline for individuals facing overwhelming medical debt. Bankruptcy, particularly Chapter 7 or Chapter 13, allows individuals to discharge or restructure their debts, including medical bills. In a Chapter 7 bankruptcy, eligible debts undergo discharge, providing a fresh start. In contrast, Chapter 13 allows for a structured repayment plan, which may include reduced payments, making it more manageable to settle medical debts over time.
Research shows that almost one in five American families are unable to pay their medical bills. By filing for bankruptcy, people can regain control over their finances, alleviating the stress and financial burden that often accompanies seemingly insurmountable medical debt.