Report suggests medical debt plays a role in many Nevada bankruptcies

A 2013 analysis reveals that medical debt is the top cause of bankruptcy in the U.S., affecting even people with year-round health insurance.

Some people in Las Vegas may view filing bankruptcy as a last resort to deal with poor financial choices. In reality, many Americans file bankruptcy after struggling with expenses that are completely necessary and beyond their control, such as medical care. In fact, one report indicates medical bills have become the leading cause of bankruptcy in the U.S.

Increasingly costly care

According to CNBC, the price-comparison website NerdWallet released a report in 2013 stating that medical debt has overtaken credit card debt, mortgage debt and other financial obligations to become the top cause of bankruptcy filings in America. This conclusion was based on data from the federal court system, the U.S. Census, the Centers for Disease Control and Prevention and the Commonwealth Fund. Using the same data, NerdWallet produced the following estimates for 2013:

  • More than one-fifth of Americans between ages 20 and 64 - in other words, roughly 56 million people - would have trouble paying for their medical care.
  • Ten million Americans would receive medical bills that they could not afford to pay, despite having full-time health insurance coverage.
  • About 1.7 million people would be affected by bankruptcy, either by personally filing bankruptcy or having a household member file bankruptcy.

Although NerdWallet has not released an analysis for 2014 yet, these figures suggest that this type of debt may affect many people this year, unless the trend of medical debt causing more bankruptcies abruptly reverses.

Managing medical bills

Fox News states that consumers often can reduce medical bills by challenging the bills or negotiating with the care provider. Patients should research the average price of any treatments they received, bearing in mind that these prices can vary greatly by region, and challenge inappropriate pricing. Patients can also look for mistakes or repetitive charges in the final bill.

Even when charges are appropriate and bills are error-free, some hospitals may negotiate lower rates with patients. Others may offer payment plans or discounts for cash payments. Patients also can hire advocates to challenge medical bills and negotiate the settlement of associated debts. Unfortunately, for people with limited income, other financial obligations or especially high-cost care, reduced bills may still be too burdensome. In this case, patients may need to explore alternatives, such as filing bankruptcy.

Debt relief

The Bankruptcy Code allows debtors to pay off or discharge medical debt through Chapter 7 or Chapter 13 bankruptcy. Many debtors consider Chapter 7 bankruptcy because medical debt may be discharged if it is not paid off through the liquidation of assets. In Chapter 13 bankruptcy, medical debt is only discharged after debtors have completed a repayment plan, which may address the medical debt or higher priority debts. However, filing Chapter 13 may be advantageous in some cases, since it gives debtors the opportunity to reschedule secured loans and keep certain assets.

Before choosing which chapter of bankruptcy to file or even committing to the decision to file bankruptcy, people who are struggling with medical debt in Nevada should meet with a bankruptcy attorney. An attorney can help a person fully understand the benefits and possible long-term ramifications of the various available options.

Keywords: medical, debt, bankruptcy