There is a common misconception that consumer bankruptcy cases stem from poor spending habits and improper credit card use. But according to a 2009 CNN report, medical bills are actually responsible for approximately 60% of consumer bankruptcy cases. Most of these cases involve middle-class, well-educated homeowners who suddenly fall on difficult financial times.
Loss of Income Statistics
Between 2001 and 2007, bankruptcy petitions filed due to medical bills increased by approximately 50%. In a survey conducted in 2007, researchers found that a majority of bankruptcy cases were medically related because petitioners either had to mortgage their home to pay medical bills, lost income due to illness, or owed more than 10% of their pretax income in medical bills.
Loss of Health Insurance
Research also shows that 75% of petitioners filing for bankruptcy due to medical reasons were covered by health insurance. These petitioners still faced serious financial difficulties because there were gaps in their insurance coverage. Some petitioners had private insurance from their jobs, but lost this coverage when illness prevented them from working.
Loss of Options
These statistics indicate that medical bills may not be the direct cause of most consumer bankruptcies, but they do play a critical role. People who suffer serious health conditions are often unable to return to work and subsequently lose their jobs. Not only does this affect insurance coverage, but it also reduces household income. Families in this situation have to learn to live on a reduced income while simultaneously trying to pay for costly surgeries, physical therapy, and medication.
If you have fallen on difficult financial times and are considering filing for bankruptcy, it’s important to first speak with a bankruptcy attorney about your case. At Cutler & Associates, our attorneys are bankruptcy advocates, dedicated to helping clients resolve their debt issues.