Contrary to some creative misinformation that is available online, the term “medical bankruptcy” simply means bankruptcy caused by being overwhelmed by medical debt. The bankruptcy itself is the same bankruptcy that applies to anyone and the fact that the debt is medical in nature has no bearing on the bankruptcy process. The entire concept of “medical bankruptcy” is almost exclusively connected to the United States (including Phoenix), where citizens are left at the mercy of the medical care providers and insurance companies with absolutely no assistance from the government or restrictions on the medical industry’s power to bilk its customers of as much money as they can. The entire concept of “medical bankruptcy” is virtually unheard of outside the United States, since most governments put some checks on the medical industry’s ability to exploit its customers to the point of financial ruin. Medical bankruptcy is a uniquely American concept and problem.

A 2009 study published in the American Journal of Medicine [Am J Med. 2009 Aug;122(8):699.] confirmed that medical expenses were the single largest cause of bankruptcy debt in the United States based on data from 2007. The study concluded from its sample group that some 62.1 percent of bankruptcies in the United States were medical in the sense that medical debt either constituted the largest portion of their debt or triggered the bankruptcy once combined with pre-existing debt. Three quarters of these “medical bankruptcies” had health insurance and most were well educated, had successful careers and owned real estate. Comparing against information collected in a similar study in 2001, the researchers concluded that there was an almost fifty percent increase in the number of bankruptcies that were directly linked to, or caused by, medical debt.

Luckily for the debtors, most medical debt can be discharged through Chapter 7 bankruptcy, which means this is frequently a better option than undergoing the Chapter 13 debt restructuring process. Although there are some claims that the courts treat medical debt more leniently – ostensibly because it was accumulated through no fault of the debtor – realistically it is just another form of debt and how it is handled as such. There is no evidence suggesting that the courts are more willing to discharge medical debt than any other form of debt that can be discharged through the Chapter 7 bankruptcy process.

Recent developments, such as the passing of the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 will likely have some impact on the concept of medical bankruptcy in the United States, though it is not likely to result in any immediate changes. With some 70 million Americans still carrying heavy debt burdens – largely tied to medical bills – the concept of medical bankruptcy will continue to be a problem in the United States for the foreseeable future. There are, at present, no proposals on offer that would cancel outstanding medical debt or prevent the insurance companies from continuing to ruthlessly squeeze Americans for every penny under the new health reform measures, so the idea that medical bankruptcy will go away seems unlikely.