Every year, over 530,000 Americans file bankruptcy. However, you may still associate it with a negative stigma. Many people associate bankruptcy with irresponsible credit card spending or poor financial management, but the truth is far more complicated.
A recent study identified the driving factors behind bankruptcies in the U.S. Although Americans can have numerous, complex motivations for filing bankruptcy, the study identified the single most prevalent cause: medical debt.
Medical debt and other debt leading to bankruptcy
The study, originally published by the American Journal of Public Health, determined that approximately two-thirds of all bankruptcies in the U.S. result from medical debt. This includes the cost of medical treatment, insufficient health care coverage and lost wages due to missed time from work.
According to the research, the other most common causes of bankruptcy include:
· Mortgage payments or foreclosure, 45 percent
· Consumer debt, 44 percent
· Financially supporting relatives, 28 percent
· Student loans, 25 percent
· Divorce, 24 percent
Researchers also concluded that the Affordable Care Act, implemented in 2010, did not significantly improve the burden of debt from medical care. The ACA was intended to increase coverage and access to care. But it did not reduce the percentage of bankruptcies tied to health care costs. Medical-related bankruptcies actually increased by two percent following the law’s implementation.
What should you do if you have medical debt?
Perhaps you are one of the half-million Americans who struggles with insurmountable medical debt. Even if you have insurance through your employer or you receive affordable insurance by the ACA, you might still have costs that you simply cannot afford.
There is no disgrace in considering bankruptcy. Far from being shameful, bankruptcy allows people to wipe their financial slate clean by discharging many, if not all, of their medical debts. If you are recovering from an illness or surgery, this may be exactly the fresh start that you need.