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Medical debt: a serious problem for many Americans

In our last post, we mentioned that FICO will no longer be factoring overdue medical payments which have already been settled into consumer credit scores, and medical payments which are going to be paid will be discounted. The change is long overdue, especially given the fact that medical debt problems affect many Americans at some point in time.

Particularly at risk are those who earn less than $30,000, among whom nearly half admitted in one survey to having less in savings than they have in medical debt. On average, one in four Americans say their savings is less than their current medical bills. So the situation is rather serious, and more people need to understand their options when it comes to handling medical debt. 

Medical debt is an unsecured debt which can be discharged in bankruptcy, provided the terms of the bankruptcy are met. According to a study released earlier this year by Nerd Wallet, medical debt was the most common reason cited for personal bankruptcy filings in 2013. That study also found that medical debt was still a problem for many Americans who were not in bankruptcy.

Having health insurance is not necessarily a major protective measure against unmanageable medical debt, either. Millions of Americans who have health care coverage still find that they cannot afford their medical bills. Part of the reason for this is that major illnesses or diseases can leave even those with insurance coverage financial devastated. And although the Affordable Care Act may offer some relief to certain Americans, the problem is unlikely to drastically change for most.

Needless to say, filing for bankruptcy is not a decision to make lightly. Most people who file for bankruptcy would rather resolve their debt problems another way, but in some cases bankruptcy is just the most sensible option. In filing, it helps to work with an experienced attorney to ensure the process goes as smoothly as possible.

Sources:

Washington Post, “Why your fear of medical debt is entirely justified,” Jason Millman, September 4, 2014.

CNBC, “Medical Bills Are the Biggest Cause of US Bankruptcies: Study,” Dan Mangan, June 25, 2014. 

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