You plan relentlessly for your financial future. You want security. You carefully consider your budget and only take on debt you know you can afford. You use your credit cards responsibly, paying them off at the end of each month.
Could you still find yourself facing bankruptcy? Maybe you worry that a sudden illness or a car accident could put you over your head in medical debt. You cannot plan for something like that. When it happens, you feel grateful to live in a country with excellent medical centers, but that does not come cheap. What if you get overwhelmed with debt based on factors that are entirely out of your hands? How often does that happen?
A significant issue
It may surprise you to learn that medical debt, according to some reports, is the No. 1 reason for bankruptcy. Nothing puts people into the bankruptcy process more often.
Much of this is likely due to the fact that you simply cannot plan in advance. With other types of debt — like credit card debt — you can. You have control over the debt you take on. It happens gradually. This still leads to bankruptcy when people make mistakes, but those mistakes are a critical part of the process.
With medical debt, you do not have to make any mistakes. You can plan all you want and try to avoid financial risks, and you can still find yourself facing bills you can never pay off.
Understanding that this is an issue is one thing, but you may still wonder about the bankruptcy rates. Just how often does this occur?
While every year is different, some estimates claim that around 2 million people feel the impact of bankruptcy due to medical debts every year. Some have claimed that around 643,000 people actually file bankruptcy. Of course, those impacted by the decision could include spouses, children and other family members, so that total is far larger than the actual amount of filings.
Even so, that’s a lot of filings. When President Obama gave the State of the Union address back in 2009, during the recession, he claimed that around 1 million medical bankruptcies happened each year, which is roughly one every 30 seconds.
While the recovering economy may help some people in this situation, the unpredictability of medical bankruptcy still means it is a significant issue. Even those who consider themselves well off and financially secure could find that they rack up far more debt than assets in a very short time.
If medical debt changes your life, it is very important for you to know all of the legal options you have. The best way to plan is to know how to react.