The new healthcare system in the United States under the Affordable Care Act (“Obamacare”) should lead to a significant improvement in how millions of people are covered by insurance. Healthcare premiums should also be reduced for millions who were spending large sums for insurance — which for some was more than half their monthly income.
The recent history of healthcare costs and medical bankruptcy indicates the situation needs fixing. According to a report in the American Journal of Medicine, 42.6 percent of all bankruptcies between 2001 and 2007 were because of medical problems. Characteristics of bankruptcy from healthcare included the following:
- 92 percent of medical debtors faced costs that exceeded 10 percent of pre-tax household income.
- Medical bankruptcy corresponds with a significant loss of income because of an inability to work with an illness or injury.
- More than half of medical debtors were middleclass homeowners with college degrees.
- 75 percent of those in medical debt had health insurance policies.
When healthcare costs become an unmanageable burden, it is entirely rational for an individual or family to consider filing for bankruptcy. The exemption laws in New York allow $75,000 (more in some counties) of the value in a home to be retained in a liquidation (Chapter 7), while a reorganization (Chapter 13) enables the debtor to pay bills over time. Speak with a bankruptcy attorney to learn more about how assets can be protected in bankruptcy.