17 Aug Why People File for Bankruptcy (Part 1)
There is a common misconception in the general community that people who file for bankruptcy are deadbeats, responsible (if not the cause) of their financial misfortune. “They should plan better,” or “They should live within their means,” or “Why don’t they just pay their bills like the rest of us” are some of the disparaging comments I’ve heard.
While everyone agrees that planning, living within one’s means, and paying bills are good things, sometimes bad things happen to good people, and despite proper planning, frugal money management, and a strong desire to pay your bills, you just can’t.
What happened to Kathleen Aldrich is a good example.
An article on MSNBC talks about Ms. Aldrich, who did everything right, and still ended up filing for Chapter 7 bankruptcy. She raised three kids as a single mom. She worked hard for years. She had good jobs. She paid her bills. She lived in a nice house and drove a nice car. She had a decent credit rating. She had health insurance. But two bouts with ovarian cancer left her with no choice but to file for bankruptcy.
Dr. Deborah Thorne of Ohio University. the co-author of a widely quoted 2005 study that found medical bills contributed to nearly half of the 1.5 million personal bankruptcies filed in the U.S. each year, said that Aldrich’s situation is “asinine” but increasingly common. In fact, it’s gotten even worse in the past two years.
Bankruptcy in the light of large medical bills is “unfortunately the only choice many people have,” she said. “They will never in their lifetimes pay them off.
“To talk with these people again and again is so frustrating. They’re such thoughtful, kind folks who are being set up by the system we have now. What’s most appalling is they’re ashamed.”
Like Aldrich, Thorne said, three-quarters of the individuals in the study who declared bankruptcy because of health problems were insured.
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