The Truth About Bankruptcy and Medical Debt


According to, most cases of bankruptcy aren’t caused by reckless spending, but by financial hardship. And many bankruptcy cases are from lower-income individuals who simply can’t afford to deal with unexpected expenses such as job loss or medical bills.

Medical Care Is Draining Bank Accounts

For people with serious medical issues the cost of getting healthy is extremely high, as evidenced by the more than 250,000 GoFundMe medical campaigns in 2018.

According to the US Consumer Financial Protection Bureau, medical bills were the most common cause of unpaid bills sent to collection agencies, accounting for more than half of all such debts.

Just how many bankruptcies are caused by medical debt is up for debate. Most filings include many types of debt, so various studies and surveys estimate that it’s anywhere from 10 percent to as much as 70 percent.

What isn’t open for debate is that health care is very expensive. The cost of health care is increasing at more than twice the pace that wages are increasing.

What Can Americans Afford?

According to a survey by Bankrate, only 40 percent of Americans can cover an emergency $1,000 expense, while a report from CareerBuilder said more than 75 percent of Americans live paycheck to paycheck.

This trend leaves little room for error if an unexpected medical expense arises, especially considering the average U.S. consumer spends more than $10,000 a year on healthcare–50 percent more than consumers in other countries.

However, it isn’t only lower-income individuals feeling the pain. A study by Harvard University showed that 78 percent of those who cited medical debt in their bankruptcy filing had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.

In fact, NerdWallet estimates nearly 10 million adults with year-round health-insurance coverage will still accumulate medical bills that they can’t pay off this year.

Serious illnesses, diseases and injuries can easily result in medical bills that total hundreds of thousands of dollars. This threatens to quickly wipe out savings, retirement accounts and home equity. Once these have been exhausted, bankruptcy may be the only remaining option.

While the number of people impacted by medical expenses remains up for debate, it remains undeniable that a vast number of people are influenced by medical expenses to file for bankruptcy in America.