Bankruptcy cases may spike due to medical debt from health crisis
In Michigan and across the United States, 2020 and 2021 have been difficult. People have needed to adapt in many ways with their jobs being affected, children taking part in remote learning, leisure activities being canceled and, for the most unfortunate, illness. Fortunately, there appears to be a light at the end of the tunnel and society is slowly returning to normal. However, there could be a challenging aftermath that wreaks havoc on people’s finances. Medical debt is a major problem and those who are dealing with it must be aware of how to deal with it.
Medical expenses from the past year-plus may lead to a flood of bankruptcies
There is concern that as people get back to their customary day-to-day life, medical expenses may overwhelm them. Estimates say that up to 12.5 million people in the U.S. could have medical debt from the crisis. A poll found that 60% of respondents were dealing with some level of medical bills and 10% from the crisis. People have managed to stay ahead of their bills because government assistance. That cannot last forever.
In the next year, experts think bankruptcies will skyrocket as debtors are unable to pay what they owe. Credit Karma members saw their medical costs rise by $2.8 billion between May 2020 and March 2021 – an increase of 6.5%. More troublingly, the numbers might not tell the entire story as debt is frequently not counted until it is past due. There was a 30% increase in bankruptcy filings in March when compared to February. This is the greatest rise in filings in more than a year. Adding unemployment to the mix and people who might no longer have a job to return to can exacerbate the problem. Even if there are steps taken to mitigate some debt, a majority will need other forms of help.
Having guidance can be key when using bankruptcy to clear medical debt
People in debt might misinterpret bankruptcy and think that it is shirking their responsibilities. In truth, it is a valuable tool for people who have gotten into an impossible financial hole. Medical debt can arise without warning and using bankruptcy may clear what insurance does not cover and what people cannot pay out of pocket. Whether that is through a Chapter 7 liquidation in which unsecured debt like medical bills will be cleared or a Chapter 13 in which a payment plan is formulated and people can keep properties like a home, an automobile and more, it is useful to have advice. Professionals can provide options with moving forward and knowing if bankruptcy is the right step.