Report: Many Americans still struggle with medical debt

Although fewer people struggle with medical bills than two years ago, high care costs and deductibles may still put many Americans at risk for bankruptcy.

In 2013, medical debt was identified as the leading cause of bankruptcy among Americans, according to USA Today. Many people in Everett might expect this issue to be less significant today, following the enactment of the Affordable Care Act. Statistics do indicate that fewer people are struggling to pay their medical bills. However, a large number of Americans may still require medical debt relief due to high insurance deductibles and the steep cost of receiving care.

Overwhelming expenses

From 2014 to 2012, the number of Americans who had trouble covering the cost of healthcare dropped from 72 million to 62 million, according to a survey from the Commonwealth Fund. Still, in 2014, 29 percent of insured Americans reported falling into medical debt or having difficulty paying medical bills.

The rise of high-deductible insurance plans may be one factor in this ongoing issue. According to a second USA Today article, 80 percent of workers now have health insurance deductibles, compared to 55 percent eight years ago. Over the same period, the cost of the average deductible has doubled. From 2013 to 2014, the number of employees with high-deductible plans also increased, from 18 percent to 23 percent.

The expensive cost of coverage, even with insurance factored in, may lead many people to avoid seeking necessary medical care. One study showed that 30 percent of Americans with high deductibles worth at least 5 percent of their annual income failed to seek treatment when they experienced medical problems. Unfortunately, this can set off a vicious cycle of debt, since the preventative care that people pass up is often markedly more affordable than emergency care.

Debt relief available

These findings indicate that medical expenses may still be a significant cause of debt for many Washington residents. People facing unmanageable medical expenses may benefit from exploring debt relief options, including bankruptcy. Medical debt is one type of unsecured debt that may be eligible for discharge in Chapter 7 bankruptcy.

Chapter 7 a liquidation bankruptcy in which a debtor's assets may be sold in order to pay off his or her debts. However, because of "exemptions" few debtors end up losing any assets. In Washington, debtors may exempt assets from liquidation under either state law or federal statutes. Exemption planning can help debtors determine which assets they can keep and which set of exemptions is more favorable.

To qualify for Chapter 7 bankruptcy, debtors must pass an income "means test." Most debtor will pass the means test. However, a debtor who would not normally be eligible for Chapter 7 bankruptcy may show that special circumstances justify filing that chapter of bankruptcy.

Finding a favorable option

Anyone who is thinking about filing bankruptcy for relief from medical debt should consider meeting with a bankruptcy attorney. An attorney may be able to give advice on the benefits that the different chapters of bankruptcy offer, given the individual's specific situation.

Keywords: bankruptcy, debt, Chapter 7