I don't doubt that could be true, but I'd sure like to see some statistics. I've only anecdotal evidence, but I've mostly seen people who live consistently above their means (rent money on credit cards) and then can't make it through a relatively minor shock to their system (short period of unemployment, car accident (no injuries), etc.).
If it's true that most bankruptcies are based on medical bills, then maybe the law should address those cases separately.
Half of Bankruptcy Due to Medical Bills -- U.S. Study
by Maggie Fox
WASHINGTON - Half of all U.S. bankruptcies are caused by soaring medical bills and most people sent into debt by illness are middle-class workers with health insurance, researchers said on Wednesday.
The study, published in the journal Health Affairs, estimated that medical bankruptcies affect about 2 million Americans every year, if both debtors and their dependents, including about 700,000 children, are counted.
"Our study is frightening. Unless you're Bill Gates you're just one serious illness away from bankruptcy," said Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School who led the study.
"Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection."
The researchers got the permission of bankruptcy judges in California, Illinois, Pennsylvania, Tennessee and Texas to survey 931 people who filed for bankruptcy.
"About half cited medical causes, which indicates that 1.9 to 2.2 million Americans (filers plus dependents) experienced medical bankruptcy," they wrote.
"Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness."
The average bankrupt person surveyed had spent $13,460 on co-payments, deductibles and uncovered services if they had private insurance. People with no insurance spent an average of $10,893 for such out-of-pocket expenses.
snip.
Bankruptcy specialists said the numbers seemed sound.
"From 1982 to 1989, I reviewed every bankruptcy petition filed in South Carolina, and during that period I came to the conclusion that there were two major causes of bankruptcy: medical bills and divorce," said George Cauthen, a lawyer at Columbia-based law firm Nelson Mullins Riley & Scarborough LLP.
"Each accounted, roughly, for about a third of all individual filings in South Carolina."
He said fewer than 1 percent of all bankruptcy filings were due to credit card debt. "That truly is a myth," Cauthen said in a telephone interview.
Cauthen said he was not surprised to hear that so many of the bankrupt people in the study were middle-class.
"Usually people who have something to protect file bankruptcy," he said. "The truly indigent -- people that we see on the street -- there is no relief that we can give them."
snip
She said many employers and politicians were pressing for what she called "stripped-down plans so riddled with co-payments, deductibles and exclusions that serious illness leads straight to bankruptcy."
That's true in my friend Ian's case. For most of his life (since age 21) he has been an owner-operator long-haul trucker, making a very good income.
He had a nice house in Indiana and paid all his bills on time.
Then, he went into stage 4 congestive heart failure. It apparently was caused by chemotherapy he took 16 years ago when he had cancer.
Well, the Indiana board of motor vehicles took away his CDL, and he basically lost everything. He lost his truck, and even though he has paid off most of his beautiful three-story house, he stands to lose it.
He can't get disability. He was turned down even though his doctors at Margaret Mercy say he is in end-stage heart failure, and he ends up gasping for breath and sweating even after walking just a few yards.
He can't work anywhere where there are electric motors or computers, as he has a pacemaker/defibrillator, and as a result of all this, he is paying for everything with his credit cards, just food, medical bills and utilities, until his disabilty is finally approved.
He has to hire a lawyer at $20,000+ to get that disabilty, even though he's probably paid the federal government millions of dollars in taxes in the thirty years he's been a semi-truck driver.
I'm a conservative at heart, but when I hear cases like this, I do understand what the liberals talk about when they get all bleeding-heart about hard-luck cases like Ian's.
Ed