Study finds link between lack of health insurance and bankruptcy

People in South Carolina may be more likely to eventually file for bankruptcy if they have a gap in health insurance coverage. A study by the American Bankruptcy Institute found that a two-year coverage gap doubled the likelihood of a bankruptcy filing.

The study identified a low income, health issues and divorce as factors in a break in health insurance. A person might lose insurance under a spouse’s coverage during a divorce. People might also have limited employment opportunities due to a health issue and thus also have limited access to health insurance. According to the researchers, while a link between medical bills and bankruptcy has been established, it is not clear what constitutes medical debt or how many cases are actually filed as a result.

Many Americans struggle with the cost of medical treatment. The Kaiser Family Foundation found that 50% of Americans said they had postponed medical or dental treatment for financial reasons. According to 34% of adults with insurance, affording the deductible is a challenge. Earlier studies indicate that issues such as lost income and bills related to health problems cause more than 66% of all bankruptcies. The American Bankruptcy Institute also reported that in July, bankruptcies increased 5%, with the greatest numbers happening in Alabama, Tennessee and Georgia.

Filing for bankruptcy may be the best option for many people who are struggling with debt because it can give them a fresh financial start. A bankruptcy filing means that all creditor actions must stop immediately, including calls from creditors, home foreclosure and legal action from creditors. If a person qualifies for a Chapter 13 bankruptcy, that person might be able to work out a plan to repay creditors over several years and keep a home and other assets. Under Chapter 7, a person may be able to discharge most debts.