Medical bills cause most bankruptcies
Image source: Flickr Creative Commons User Juhan Sonin
We've written before about how medical costs can drive many North Carolina consumers to bankruptcy. Unpaid medical bills are one of the leading causes of personal bankruptcy and having medical insurance isn't much of a barrier in this respect. According to a Harvard study on medical bankruptcy, 75% of those that file Chapter 7 or 13 because of their medical debts are insured. It's even worse on those that aren't.
The Medical Bankruptcy Fairness Act of 2014 was introduced by Senator Sheldon Whitehouse (D-RI) and is co-sponsored by Senator Elizabeth Warren (D-MA) to help clear hurdles for families hard hit by medical costs to get faster and more comprehensive relief without losing assets they need to keep their family afloat. Senate Bill 2471 can be read in its entirety by clicking here, but here are the main points:
#1 Medically distressed debtors could fast-track bankruptcy. These are consumers that in the three years prior to filing bankruptcy incurred medical bills equal to or greater than the lesser of 10% of their Adjusted Gross Income or $10,000, lost out on child support or alimony of $10,000 or more due to the payer suffering a medical occurrence or that lost their job or had their hours or wages cut due to a personal illness or caring for a dependent or non-dependent family member suffering an illness.
#2 Would protect up to $250,000 in equity for the debtor's residence.
#3 Would allow a medically distressed debtor to opt out of the credit counseling since it wasn't poor spending habits that led to the financial crisis.
#4 Would allow medically distressed debtors to more easily have student loans discharged in bankruptcy.
Senator Warren said, “This bill will provide some relief for families facing crushing medical debt and help them get back on their feet through a fairer bankruptcy process.”
It's important to know that unpaid medical debt can have a larger-than-expected impact on your credit report. Last month, the Consumer Financial Protection Bureau released a report that said that consumers with medical debts that have gone into collections are hit too hard for this late debt. The report said that being late on medical bills is not necessarily a sign of being less than credit worthy.
To help Senate Bill 2471, the Medical Bankruptcy Fairness Act of 2014, gain passage, contact your Senators to tell them to vote yes. And if your medical bills are overwhelming you, contact the law offices of John T Orcutt to find out how filing bankruptcy now can get you a clean slate, free from unsecured debt like doctor and hospital bills.