You say the word, "bankruptcy," and people immediately think, "that person (or business) must have been financially irresponsible." Bankruptcy carries such a stigma with it that people build up large piles of debt before they consider asking for help. It is time that we, as a society, change the stigma.
Medical bills: An unexpected expense
Let us start with a concept that most people can find some sympathy for: medical debt.
The average middle-class, fiscally-responsible American has just enough money in their savings account to cover emergencies. Many experts advise saving a few months' worth of expenses, or the equivalent of a few paychecks. Let us say a family follows this advice and saves $5,000 - an amount reasonable to them, based on their unique financial situation. That is enough to handle car problems, house repairs and a trip to the doctors, but it will not cover most major medical emergencies. Factor in chronic conditions, and it should come as no surprise that a 2014 study by the Kaiser Foundation found that one in three Americans struggles with medical bills.
The truth is, most people do not prepare for a heart attack. They don't prepare for a chronic illness. Medical bills are sudden. They are unexpected. Even when people do prepare, they often find the medical costs to be far more than they imagined.
It can happen to anyone
The Kaiser Foundation interviewed a wide range of people for their medical debt study. The authors indicate a few things that we should all keep in mind:
- Most people who struggle with medical debt have health insurance
- The medical expenses were the first time most study participants had experienced financial challenges
We can say from experience that both of these points are true for the majority of our clients who face substantial medical debt. In other words, responsible people are blindsided - and it can happen to any of us.
Medical debt is overwhelming, particularly when you are also facing difficult medical issues. When it rains, it pours. Yet, there is a solution.
Bankruptcy is a cure to the financial illness
A 2013 study by a company called NerdWallet Health, reported on by CNBC, found that medical debt is the number one cause of bankruptcy in the United States. Yet, many more people are suffering in silence, including 50 million Americans who face overwhelming medical bills. Isn't it time we helped them?
If your medical bills are getting out of hand, consider bankruptcy. It is a cure, not a disease. It will help you get back on your feet in a responsible way.
And if you know someone facing serious medical debt, please support their decision to file bankruptcy. This is not the time for shame. It is the time for compassion.