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Negative consequences of medical debt

For people in Pennsylvania, unexpected medical debt can lead to catastrophic financial effects, even for those who have health insurance. In 2007, for instance, 62 percent of all personal bankruptcy filings resulted from unmanageable medical debts, and most of those people were well-educated homeowners. Of those who filed bankruptcy due to medical debt, three-fourths had insurance.

Medical debt can cause serious consequences for people. Many people who incur high medical debt as a result of unexpected emergencies or illnesses may find themselves struggling to pay their mortgage or rent payments, leading to housing instability. Some people forgo paying their utilities or even purchasing food in an attempt to stay on top of the high costs of medical care and to pay steep premiums.

People sometimes forgo seeing a doctor, filling needed prescriptions or attending needed follow-up care due to the associated expenses. For those who are unable to pay their medical bills, debts are often turned over to collection agencies which, in turn, make negative reports to the credit reporting agencies. In addition to the problems associated with the resulting damaged credit, the debt collectors may also file civil lawsuits against the debtor, which can lead to judgments, garnishments and bank levies.

For many people who are faced with mounting medical debt, a Chapter 7 bankruptcy filing may present a good option. When medical debt is discharged in bankruptcy, creditors are then prevented from all debt collection tactics, including harassing phone calls and letters as well as filing lawsuits. Bankruptcy similarly stops creditor judgments and garnishments, effectively providing people with debt relief and a fresh financial start. An attorney who has experience in bankruptcy law can discuss other debt relief options with a client.

Source: The Henry J. Kaiser Family Foundation, "Medical Debt among People with Health Insurance", Karen Pollitz, Cynthia Cox, Kevin Lucia and Katie , November 23, 2014

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