Bankruptcy often happens for a variety of reasons. One of the top causes that studies have identified is medical debt. Many bankruptcy filers may also have other types of debt, such as credit card bills or car loans, but medical debt makes up a significant portion of their financial obligations. This may be the main reason they decide to declare bankruptcy in the first place.
However, many people have health insurance that should theoretically cover their medical bills. Why is it that having insurance does not necessarily prevent bankruptcy? Why could you find yourself facing overwhelming medical debt even if you have an insurance policy?
Deductibles and personal costs
For one thing, you often still have to reach your deductible. Depending on your insurance policy, this could mean that you are responsible for thousands of dollars in bills before the insurance covers anything. Similarly, there may be personal costs built into the plan, so even when insurance does apply, it may not cover 100% of your bills.
Additionally, not all medical care providers are in the insurance company’s network. If you receive care from an out-of-network facility or physician, the insurance company may say that you are still personally responsible for that debt. This can be especially problematic in an emergency situation, when you are likely seeking immediate medical care and not stopping to consider which hospitals or doctors are within your insurance company’s preapproved network.
Your bankruptcy options
Are you facing overwhelming debt this year? Make sure you understand all of your options when it comes to Chapter 7 and Chapter 13 bankruptcy.