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Study: Medical debt increases as primary basis for bankruptcy

A credit counseling service that serves financially stressed Americans nationwide says there has been an increase during the last year and a half in the percentage of debtors who have decided to file for bankruptcy who have made the decision based upon medical debt. In Cincinnati, individuals and married couples who file for bankruptcy protection are generally required to complete credit counseling as a requirement of the federal bankruptcy law. The counseling must be completed by an agency approved by the U.S. bankruptcy trustees.

One such counseling agency says roughly 20 percent of Americans filing for bankruptcy have made the decision primarily based upon medical debt since the beginning of 2010. That is an increase from roughly 12 to 13 percent of Americans seeking bankruptcy relief in 2008 and 2009. The data includes the survey results from more than 47,000 Americans this year and more than 100,000 bankruptcy petitioners in each of the preceding three years.

The statics reflect more than the increasing costs associated with medical treatment. The backdrop for the increase in bankruptcies tied to medical debt also reflects high unemployment rates across the country. Michelle Jones, a senior vice president of counseling with the agency, says high unemployment leads to more Americans losing company sponsored health coverage benefits.

Jones says most people are reluctant to default on medical debt. Often, she says, people often tend to increase other debt to cover their health care costs. The high interest on credit cards or other forms of credit used to service the medical debt can lead to greater financial distress.

In other cases, hospitals and health care providers are often quick to refer debts to a collection agency. While some people to choose to negotiate with collectors and creditors, this strategy does not always work. However, there are other options available for people who are overwhelmed by medical debt, including bankruptcy. If you have questions about how bankruptcy can help you deal with your medical debts, an experienced Cincinnati bankruptcy attorney can give you answers.

Source: The New York Times, "Medical Debt Cited More Often in Bankruptcies," Ann Carns, Aug. 18, 2011

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