WASHINGTON, April 26, 2000 -- A forthcoming study finds that about half of the one million Americans who file for bankruptcy each year do so because of medical bills and other problems arising from serious illness or injury, The Washington Post reported.
The study emphasizes the fragility of middle-class existence, one of its authors said. These families are "just one serious illness away" from financial collapse, Prof. Elizabeth Warren of the Harvard School of Law said.
Contrary to expectations, many of those filing for bankruptcy had health insurance but were not sufficiently covered for catastrophic illness and for the job losses that often accompany serious illness.
The study comes as Congress is considering a number of "reform" measures that would make it more difficult for consumers to file Chapter 7 bankruptcies, which wipe out most debts. Instead, they would have to file Chapter 11, which requires heavier payments to creditors.
Warren, a former member of the National Bankruptcy Review Commission, and her colleagues studied bankruptcy filings in eight judicial circuits around the country. Projecting their findings nationally would mean that nearly 600,000 of the one million bankruptcies in recent years were related to major illness within two years of the filing.
In many cases, it is a combination of heavy consumer debt and major illness that makes it impossible for families to recover from a catastrophic illness, Warren said.
Without being able to wipe out their debts in the bankruptcy process, Warren said many families would "face collection for the rest of their lives."
The banking and credit card industries are lobbying heavily for tougher bankruptcy laws.
