The number one reason people file for Chapter 7 bankruptcy is overwhelming medical debt.

Medical expenses are a leading cause because they can be unexpected, unavoidable, and often come with high costs that insurance may not fully cover. Many people facing serious health issues also experience a loss of income, making it even harder to manage their bills.

The types of medical debt that most commonly lead to bankruptcy include:

1. Hospital Stays & Surgeries – Costs for emergency room visits, surgeries, and prolonged hospitalizations can easily reach tens or hundreds of thousands of dollars, even with insurance.
2. Chronic Illness Treatment – Conditions like cancer, diabetes, and heart disease require ongoing care, medications, and specialized treatments, leading to significant financial strain.
3. Unexpected Medical Emergencies – Accidents, strokes, or sudden severe illnesses often result in high, immediate medical bills, with many procedures not fully covered by insurance.
4. Maternity & Newborn Care – Even with insurance, high deductibles, complications, NICU stays, and out-of-network charges can cause overwhelming debt.
5. Mental Health & Addiction Treatment – Therapy, rehab, and psychiatric care often have limited insurance coverage and high out-of-pocket costs.
6. Prescription Medications – Lifesaving or long-term medications (such as those for autoimmune diseases or cancer treatments) can be extremely expensive.

Is Work Insurance Enough?

Not always. While employer-provided insurance helps, it often doesn’t cover everything due to:

• High Deductibles & Co-Pays – Many employer plans have deductibles of $5,000 or more, meaning people must pay large sums before insurance kicks in.
• Out-of-Network Charges – If a specialist, hospital, or emergency care provider is out of network, costs can be astronomical.
• Non-Covered Treatments – Some necessary procedures, prescriptions, or mental health treatments may not be covered at all.
• Job Loss & Loss of Coverage – If someone loses their job due to illness or injury, they also lose their insurance, leaving them with medical bills and no income.

For many, even having insurance isn’t enough to avoid medical debt and potential bankruptcy. Don’t just pick the cheapest premium, consider deductibles, out-of-pocket maximums, and network coverage to avoid surprise costs. Opt for an HSA or FSA, if available, a Health Savings Account (HSA) or Flexible Spending Account (FSA) lets you save pre-tax money for medical expenses. Check provider networks, always verify if doctors, hospitals, and specialists are in-network to avoid huge out-of-network charges.

Other common reasons people file for bankruptcy include:

• Job loss or reduced income
• Excessive credit card debt
• Divorce or separation
• Unexpected emergencies (e.g., accidents, lawsuits, or natural disasters)