The AARP has a new campaign on TV and the Internet about the high number of bankruptcies caused by medical bills. This is contrary to the position in the study that Andy Miofsky spoke of in his article Is Bankruptcy Reform Around the Corner? That study links high debt to bankruptcy.
It seems ridiculous to criticize the fact that people with lower debts don’t file bankruptcy and people with higher debts do. It would be more ridiculous if the study found that people filed for bankruptcy with lower debts, wouldn’t it? Even if people who file for bankruptcy have high debts, it doesn’t mean that they spent excessively.
Ask the families on the website if they feel that their medical treatments and medications were “excessive”. I am unsure of where the AARP got their figures, however it has been long recognized that medical problems are a very high contributing factor to many people’s decisions to file for bankruptcy and a high number of bankruptcy filers have health problems.
A Harvard study was conducted a few years ago by Elizabeth Warren, a very well repected professor and expert regarding economic issues of American families, and bankruptcy issues. The study backs up the link between people who file for bankruptcy and medical problems. Prof. Warren stated that:
“As part of a research study at Harvard University, our researchers interviewed 1,771 Americans in bankruptcy courts across the country. To our surprise, half said that illness or medical bills drove them to bankruptcy. So each year, 2 million Americans — those who file and their dependents — face the double disaster of illness and bankruptcy.”
Warren also said that
“Every 30 seconds in the United States, someone files for bankruptcy in the aftermath of a serious health problem.” That adds up to well over 1 Million Americans that the study linked health issues with bankruptcy.
My informal study, based upon 20 years of working with people who file for bankruptcy ,is that people are not running up their credit cards on luxuries, but in covering day to day needs and to cover minimum payments on bills.
The higher debt amounts are often due to people having access to easy credit and encouragement from lenders to solve their financial problems by consolidating their bills and/or switching to a lower interest rate.
My clients are just trying to get by, meet their financial obligations, and stay away from bankruptcy. Every day I see good people who didn’t want to be in my office at all. The majority of the cases have medical problems, divorce or job/income loss as the catalyst that drove them to seek protection in bankruptcy.
My clients in 2008 do owe more than those from 1998, but I attribute that to the fact that they weren’t able to keep borrowing in 1998, and therefore they had no choice but to seek legal help earlier. When I ask my clients what the spent their money on, it isn’t luxury items or frivolous purchases. Time after time, the response is: to pay my bills. That answer hasn’t changed.
I note that the AARP didn’t don’t say that there were 1.85 Million cases filed, but that 1.85 Million Americans filed for bankruptcy. You can see testimonials on the AARP website and judge for yourself.
These are people who never thought that they would be in the position they found themselves in, and people who were not driven into bankruptcy due to excessive spending. Please take a look at the AARP website: www.DividedWeFail.org for more information.
by Susanne Robicsek, Charlotte NC Bankruptcy Lawyer
Read about Elizabeth Warren and listen to the July 1, 2008 NPR Interview Your Credit Report: Know Its Perils, Keep It Clean Terry Gross and Elizabeth Warren
Washington Post Op-Ed by Elizabeth Warren February 10, 2005
U. law lecturer Warren studies why people file for bankruptcy 8/6/92 article on earlier research by E. Warren
Books by Elizabeth Warren:
Warren, Elizabeth. The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke (Basic 2003). AMAZON (Purchase)
Warren, Elizabeth & Amelia Warren Tyagi. All Your Worth: the Lifetime Money Plan (Simon & Schuster 2005).
Seeking The Last Resort Earlier: Why Bankruptcy Should Not Be Your Last Resort November 30, 2007; and my explanation of the Means Test on my website.