You have always carefully watched your financial decisions. You limited credit card debt to only what you could pay off during the month. You bought a house that cost far less than you could actually afford. You bought a used car with your savings so you would not have a car payment. You never took out payday loans or other high-interest loans.
For years, you worked on your credit score. You made smart decisions. Even though you heard stories about people getting trapped by massive debt, you never thought it would happen to you.
Then you had a medical emergency.
The type of emergency is not necessarily important. The result was that you got out of the hospital with a startling amount of unplanned medical debt. You did not have enough in savings to cover it — not even close.
On top of that, you still needed medication and treatment. That adds more and more debt on top of what you already owe, but you aren’t going to ignore your doctor’s orders on financial grounds. You just want to get healthy.
The final nail in the coffin, though, is that you missed a lot of time at work. They had to replace you. You started using your credit cards just to make ends meet, unsure how else to pay for everything without your standard income. All of those affordable costs are now too much to bear. Before you know it, you have a mountain of credit card debt and medical debt, all from one unfortunate event.
How likely is it?
Maybe this hasn’t happened to you yet, and you read this example thinking that it was far-fetched. What you need to understand is that this can and does happen. According to debt studies, “significant medical debt” plays a role in somewhere between 25 percent and 50 percent of bankruptcy cases.
Think about it for a second. As many as half of all bankruptcy filings could find their roots in medical debt. Clearly, this is a very real issue in the United States.
What can you do?
The good news is that you do have options. With Chapter 7 bankruptcy, for instance, you can pay off some of that medical debt — and many other unsecured debts, like your credit card debt — by liquidating assets. You can then discharge the rest.
Is that something you are interested in? The right path is different for everyone. Your case is unique. What is important is that you fully understand all of the legal options you have when your debt seems overwhelming.