Why so many Americans file for bankruptcy
On Behalf of O’Brien Law Firm, LLC
Posted on: September 2, 2021
A financial situation leading to bankruptcy could happen to any household faced with unexpected medical costs or a sudden loss of income. Whether used to seek relief from overwhelming consumer debts or to stave off foreclosure, bankruptcy may offer a workable path forward.
Health care debt is a common cause of bankruptcy; as noted by the American Journal of Public Health, medical bills contributed to nearly 67% of American bankruptcies in 2019. The U.S. Census Bureau reported that 19% of American households were unable to pay their medical bills in 2017. Households with children or residing in southern states were more likely to experience unmanageable medical debt.
Medical expenses often lead to financial hardships
Although many employers provide health insurance, out-of-pocket expenses and co-pays add up quickly. If an individual needs time off to recover or care for an ill family member, the loss of income could have a significantly negative effect on a household’s ability to manage a budget.
Financial hardships generally begin when a household can no longer meet its normal monthly expenses. While attempting to cover basic necessities, the overwhelming burden could take a painful toll on a family’s emotional and mental well-being.
Bankruptcy may provide the needed relief
As described in an opinion article in The Chattanoogan.com submitted by a U.S. district judge, the bankruptcy court acts as a “court of second chances” for individuals faced with unmanageable debts. Individuals often file petitions because of an economic downturn or financial issues they had no control over.
Many debtors begin to consider bankruptcy for relief after receiving phone calls and letters from collection agents threatening legal action. Filing a petition may stop collection activity and qualify for a discharge of unpaid consumer debts including medical bills.