Many residents in New Hampshire may be surprised to learn that the leading cause of U.S. bankruptcies is outstanding debt from medical expenses. A 2014 study discovered that approximately 60 percent of bankruptcy claims are related to medical debt. According to the Federal Reserve, approximately one in every six credit reports have records of some type of medical debt collection. Almost 17 million adults in the United States have had their credit adversely affected by outstanding medical obligations.
Financial advisers note that even $100 in outstanding medical debt can reduce a person’s credit score by at least 80 points once it goes into collection. According to the Commonwealth Fund, approximately 30 million people in the United States were targeted by collection agencies about outstanding medical bills during 2010. Having insurance may not necessarily be the cure either. Approximately 10 million insured adults are unable to pay their medical bills. Researchers discovered that around 75 percent of the medical debtors sampled in a 2007 Harvard study were insured.
The Harvard study examining a significant sample of bankruptcy filings also discovered that more than 62 percent of the claims were related to medical debt. In this study, the debtors were described as people with middle-class occupations who were well-educated and owned homes. Even though medical expenses are often sudden and unexpected, collection agencies treat this debt the same as outstanding mortgage payments or unpaid credit card bills.
Both unpaid and paid medical expenses may adversely affect a consumer’s credit rating. Credit scores may suffer for up to seven years after the date that the original medical debt went into default. People who are struggling to stay current with medical bills may benefit from consulting a bankruptcy attorney as early as possible.
Source: Los Angeles Times, “How to escape the medical care debt trap“, Steve Trumble, July 22, 2014