Some research has shown that medical debt is the primary reason people need to file bankruptcy. A widely cited study published in the American Journal of Public Health in 2019 estimated that about 66.5% of bankruptcies were tied to medical issues, including both medical bills and the loss of income due to illness. Other studies have reported lower percentages, but medical debt consistently ranks among the leading causes of bankruptcy filings in the U.S. The lack of universal health insurance coverage for everyone makes nearly everyone just one serious health problem away from excessive debt. Even people with good health insurance can find themselves owing many thousands of dollars following routine surgical procedures.
In both Chapter 7 and Chapter 13 bankruptcy, medical debts are considered unsecured debts. This means they can be discharged or eliminated entirely, depending on the type of bankruptcy filed and the individual’s financial situation. Filing for bankruptcy triggers an automatic stay, which halts all collection efforts by creditors, including medical providers. This means that creditors, including hospitals and doctors, cannot pursue legal actions, such as wage garnishment or lawsuits, to collect on medical debts while the bankruptcy case is ongoing. This provides immediate relief from aggressive collection tactics and gives the debtor time to reorganize their finances.
People who incurred substantial medical debts without insurance coverage may find relief through bankruptcy. Bankruptcy laws treat medical debts similarly regardless of whether they were incurred with or without insurance coverage, meaning that uninsured medical expenses can be discharged like any other medical debt. For people overwhelmed by medical debts and unable to afford necessary healthcare, bankruptcy offers a chance for a fresh financial start. By eliminating or reducing medical debts, bankruptcy allows debtors to regain control of their finances and focus on rebuilding their lives without the burden of overwhelming medical bills.
