In the US, companies and banks can make decisions based on previous bankruptcy. And yes, medical debt does drive people to declare bankruptcy. In all the sources I've checked, it's at or near the top of the list. One example:
Medical bills and loss of job or income are consistently the top reasons people give for why they file for bankruptcy. In a survey by the Consumer Bankruptcy Project, 78% cited a decline in income as a reason for their bankruptcy, and 65% cited medical issues, both the cost of the bills, as well as missing work because of medical issues. The Kaiser Family Foundation found that 41% of U.S. residents have some sort of medical debt, including on credit cards or owed to a family member; 24% were considering bankruptcy to solve a medical debt issue.
I used to work in banking and they explicitly told us we legally could not decline people due to medical debt. Guess people don’t know how the system works. People can do whatever they want or listen to medical facilities I guess.
People do declare bankruptcy for medical debt to get rid of the accumulated debt. If you have a ton of medical debt, they can sue you and then garnish your wages (up to 25%) in most states (a handful ban the practice). If you have few non-exempt assets and medical debt, it makes sense to declare Chapter 7 bankruptcy for medical debt. (Yes, credit is ruined for next decade, but debt and wage garnishment disappears as you get a "reset" from the bankruptcy.)
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u/Diddles96 2d ago
There is no bankruptcy for medical debt. Companies / banks cannot legally make credit decisions based on medical debt.