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Affordable Care Act and the drop in personal bankruptcy filings

Bankruptcy Lawyer Bryan W. Stone answers the question: “What are my alternatives to bankruptcy?”


Anyone who follows the news even a little bit has likely run across an article discussing either the merits or failings of the Affordable Care Act. Some blame the measure (also referred to as “Obamacare”) for rapidly rising health care costs. Others say the ACA should be heralded for bringing affordable health care coverage to millions of Americans. Though Republicans have now taken a concrete step to move closer to repealing and replacing the ACA, the Senate remains an obstacle and the fate of the Act is uncertain.


Surgeon-with-mask-Charlotte-Bankruptcy-Lawyer-232x300Not wanting to get involved in the policy particulars of the ACA, let’s keep this focused on bankruptcy-related issues. You might be wondering, how does the ACA tie in with bankruptcy? The link between the two is actually stronger than you might think. According to a number of groups, the number one cause of filing for personal bankruptcy protection in the U.S. is medical expenses. That’s right, greater than credit cards or student loans or underwater mortgages, health care costs are the number one thing pushing families into bankruptcy. A Harvard study done in 2009 concluded that more than 60% of all personal bankruptcies are caused by medical debt.


Here’s where the ACA comes in. By subsidizing the cost of health insurance, particularly for lower income families, the ACA helped dramatically expand the number of people who are covered by health insurance. In fact, the ACA helped 20 million people get insurance coverage who previously had none. This increase in coverage is important because it, in turn, leads to increased protection from unexpected medical bills. Though high quality health insurance does a great job covering families and limiting their exposure to costly bills, experts say benefits exist even with high deductible plans. High deductible insurance is important because it caps the potential liability of a family, making it far less likely that they will incur truly monumental health care costs.


Consumer Reports decided to do some digging into bankruptcy numbers to see if they could spot a link between the ACA and bankruptcy rates. The numbers turned out to be very interesting. From 2010 through 2016, the number of personal bankruptcies filed in the U.S. dropped in half, falling from 1.5 million in 2010 to 770,000 in 2016. When was the ACA signed into law? 2010.


Though it might be tempting to give the ACA full credit for the dramatic decline, experts say we should take the numbers with a grain of salt. First, there are many other factors at play here. For one thing, the economy improved between 2010 and 2016, which would be responsible for a big drop in filings. For another, changes in bankruptcy rules might also play a part in the drop off. Additionally, credit requirements have been tightened in recent years, meaning that people’s ability to take on high levels of debt has been reduced.


All of the factors mentioned above could and likely did play a role in the decline in the personal bankruptcy rate. Even still, experts agree the ACA played an important part in bringing the numbers down. Anecdotally, bankruptcy attorneys report encountering much fewer people without health insurance and hear less often how medical debt served as the catalyst for a bankruptcy petition. Though the ACA is far from perfect, if it’s been effective in reducing crushing debt loads on thousands of family that might cause some to reconsider whether it’s something we should be so quick to get rid of.


If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.






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