In 2015, a Wall Street Journal article entitled “The Future of Personal Bankruptcy in a Post-Obamacare World” written by bankruptcy reporter Katy Stech, examines a 2014 study of bankruptcy in Massachusetts in an attempt to see how mandatory health insurance, enacted by lawmakers the in 2005, has affected bankruptcy. We weighed in with Texas Bankruptcy Attorney Christopher Lee, Owner of Lee Law Firm LLC to get a more thorough insight into how bankruptcy and health insurance affect each other, and to answer to the question “How will mandatory health care influence bankruptcies in America?”
The 2014 study of focus was conducted by Northeastern University law professor Daniel Austin, and unearthed some interesting findings. He found that the medical debt of Massachusetts residents was much less than the rest of the US. Another important and interesting fact was that medical bankruptcy (where medical debt is the leading cause of bankruptcy) nationwide is between 18%-25%, far less than the 62.1% cited by President Barack Obama in his State of the Union address in 2009.
So does this mean that The Affordable Health Care Act will curb bankruptcies in the US? Let’s ask Christopher Lee in Dallas:
The article mentions that medical debt is the number one reason for filing for personal bankruptcy. Does this hold true with the individuals that you advise?
I would this is most likely number two for my clients. Of course, medical issues are always a problem and do cause people to file for bankruptcy.
What is the primary reason you see as people wanting to file for bankruptcy?
What I see in my practice that causes people to file bankruptcy is job loss. It’s the number one root cause of bankruptcy filings. Most people are using every dime that they earn and most are in two income households. Once one of these folks loses their job they can no longer make ends meet. And even if that job loss is for a month or two only it puts them in such a hole that they cannot dig out of and they have to retain me to help them. Most of the time that help comes in the form of a Chapter 13 bankruptcy.
What are some other reasons why individuals come to your law firm to file bankruptcy?
It can range from loss of job, to medical, to divorce, overspending, and bad business deals.
Could the system designed to give people access to affordable health insurance make families more financially stable and keep them out of bankruptcy?
Absolutely, when people have these very high medical deductibles and then add that to their already extremely high monthly health costs, people just cannot afford it. Put those monies back into their pockets every month/year and it would keep so many of our citizens out of bankruptcy.
It appears that in most cases medical debt can be discharged in a successful bankruptcy. Are there types of debts that cannot be discharged? What are they?
Yes, usually student loans cannot be discharged and some IRS debt. Also, debts derive from fraud are not able to be discharged in bankruptcy
The article also sources data that bankruptcy filings are declining year after year. Is this a trend that you’re noticing in your practice? If so, what do you think is driving this trend?
Yes, I do see this and I believe that it is a function of the mortgage crisis. People that went through this crisis from 2007 to 2011 have lost their homes and renting now. With the foreclosure listing down people are not trying to save homes as much which has driven the bankruptcy filings down.