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Massachusetts Bankruptcy is Down and Medical Debt is One Reason

Will the new health care law, the Affordable Care Act (aka Obamacare) reduce bankruptcy?  A recent study undertaken by the Chicago Federal Reserve bank showed that Massachusetts bankruptcies are down 20% because of the Massachusetts health care law (aka Romneycare).

Apparently, the US is unique in the developed world in that medical billing is a leading cause of bankruptcy filing.  It is not clear that this was ever true in Massachusetts, however.  Nevertheless, the fact that bankruptcies are down, is good!

Overall, Personal Bankruptcies are Down

The rate of bankruptcy filing, for whatever reasons, was down by over 12% in 2013 and will be down 8% to 10% in 2014, according to estimates.  On average, filings are down 10% per year since 2011.  This is true on a monthly basis as well.

In Massachusetts, the rate of uninsured residents went from 8.4% in 2006, before the law went into effect, to 3% in 2012, after the law had some time to sink in.  The consequences are far reaching:  in an addition to being correlated to reducing bankruptcies, folks are insured and getting better, more time effective health care.  Folks not filing for bankruptcies are able to boost their credit scores, get more credit for necessary items such as transportation and mortgages, according to the Chicago study.  In fact, there was a “particularly pronounced” reduction in mortgage delinquencies of over $5,000, according to the authors of the study.

A report undertaken by MIT professor Jonathan Gruber indicated that the same was true in Oregon, where a similar medical insurance program to Massachusetts’ was instituted in 2008.

How Does the Affordable Care Act Help Prevent Bankruptcy?

Under the new health care law, the maximum anyone would have to pay out of pocket would be $6,350 for a person and $12,700 for a family.  While these are huge sums of money, they are not likely to put a family into bankruptcy.  And most health care providers are willing to work with debtors, or forgive debt, if they are paid mostly under an insurance plan.

What Are the Leading Causes of Bankruptcy if not Medical Debt?

Anecdotal evidence from 28 years of practicing, it seems to come down to two things:  getting sick, injured or laid off and losing a job, or, simply bad judgment.  Folks that don’t have the six month cushion that financial planners talk about find a sudden loss of income to set a spiral of debt – mortgage, credit card, etc.  Folks that bought too much house, or too many houses, or invested in a business that did not work out, often end up seeking bankruptcy protection and a fresh start.

How do I Find An Experienced Bankruptcy Lawyer?

Call Attorney Neil Burns for a free consultation.  After 28 years, he has represented hundreds of consumers and carefully helped them get the fresh start that the law provides.  The call is free:  617-227-7423

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