Broome County Family Law Blog

In New York and across the United States, one of the most common ways for people to find themselves in difficult financial circumstances is through medical expenses. For most people, these medical costs will lead to various attempts to keep from falling too far behind. One note to remember is that if the costs are too substantial to handle, an alternative to consider is bankruptcy.

Understanding the problem and potential strategies to avoid it might be useful. Consumer Bankruptcy Project conducted a study in 2019. It surveyed 910 people who moved forward with a bankruptcy from 2013 to 2016. Of that group, 65.5 percent had medical problems as a contributing factor. Up to 530,000 families might need to file for bankruptcy in part due to medical expenses.

Many people in New York are struggling with massive student loan debt. Across the country, borrowers owe $1.59 trillion in student loans, and the issue has been raised in presidential campaigns and major media. While filing for bankruptcy can help people to deal with many types of overwhelming debt, including credit card bills, medical costs or car loans, student loans cannot be discharged with a personal bankruptcy filing in most cases. Congress actually passed legislation on multiple occasions making it more difficult for people to escape their student loan debt through bankruptcy.

Some people may still try to pursue a discharge of their student loan debts, but absent specific circumstances, they could face major challenges. In the first place, student loan debt can only be discharged through Chapter 7 rather than Chapter 13 bankruptcy. Chapter 13 is reorganization bankruptcy and is often used for those who are ineligible for Chapter 7 because they make too much money. In order to be eligible for Chapter 7, people typically must make at or below the median income for households of their size in their state.

Medical bills are a major problem for people living in New York and across the U.S. In fact, around 137.1 million Americans have endured financial hardship due to medical expenses in 2019 alone, according to a new study by TD Ameritrade.

Researchers from the financial services firm found that medical debt is the top reason that people of all ages consider tapping into their retirement savings. Meanwhile, a separate study found that 66.5% of all personal bankruptcies filed by U.S. adults are linked to medical debt. This is because medical emergencies can leave Americans with staggering bills. For example, one woman said that she blew through $20,000 in savings and racked up tens of thousands in medical debt when she lost her job, became uninsured and suffered a series of medical emergencies, including a heart condition that required surgery.

Older adults in New York are more likely to have to declare bankruptcy than in previous decades. People 65 and older now make up 12% of people filing for bankruptcy compared to about 2% in 1991. Between 1991 and 2016, there was a 66% increase in people between the ages of 55 and 64 filing for bankruptcy. For people aged 65 to 74, it was a 204% increase.

The increase is largely due to medical bills. One 66-year-old retired handyman is a typical example. He had several injuries that led to medical expenses he could not meet, and he eventually had to declare bankruptcy. His focus was on trying to get his bank to agree to a loan modification that would let him stay in his home of 40 years. Many people lose their savings, and since they may be working less or not at all, they may be unable to recover financially.