Concerns over healthcare causing financial problems increased for many U.S. households in 2020. A study by West Health and Gallup revealed that half of all American adults feared medical issues could result in bankruptcy.
The study discovered that 15% of all households surveyed had at least one unpaid medical bill. Those households also did not have enough income to pay off the debt within a year.
Many households find it hard to borrow money
At least one-quarter of individuals surveyed claimed they would need to borrow to pay off a $500 health care bill. Friends and relatives provided loans to 14% of the households surveyed. Credit cards provided 12% of the respondents with a way to pay their medical debts.
When a household begins paying medical bills with credit cards, financial hardships may follow. A major illness, for example, may cause the main income earner to take time off from work. Lacking sufficient income, a household could quickly fall behind.
A Chapter 7 or Chapter 13 bankruptcy may bring relief
Individuals facing severe financial issues often turn to bankruptcy as an option for relief. As noted by U.S. News, households earning less than their state’s monthly median income may qualify for Chapter 7 bankruptcy. The court may then liquidate certain assets and dismiss debts such as unpaid medical bills and credit cards.
Households earning more than New Jersey’s monthly median income may qualify for a Chapter 13 bankruptcy. This plan may help avoid foreclosure on a home. A Chapter 13 petition requires creating an affordable monthly payment plan. After making all the approved monthly payments, the court may discharge the remaining balances.
Studies show that medical issues lead to financial struggles for many households. A Chapter 7 or Chapter 13 bankruptcy may offer a way to take back control of a budget and gain a fresh start.