Medical Debt as a Cause of Consumer Bankruptcy

24 Pages Posted: 27 Oct 2014 Last revised: 11 Nov 2015

Date Written: 2014


In his 2009 State of the Union Address, President Barack Obama pleaded with Americans to support healthcare reform, stating, “This is a cost that now causes a bankruptcy in America every thirty seconds.” That jaw-dropping statistic was based on a study co-authored by Senator Elizabeth Warren (D. Mass.) (then a professor at Harvard Law School), which concluded that 62.1% of consumer bankruptcies are medical bankruptcies. The figure has been widely cited by lawmakers, academics, and the media in support of expanded government healthcare. Recently, Senator Warren co-sponsored legislation to create a new category of those filing for bankruptcy: the “medically distressed debtor,” who would be exempt from stringent bankruptcy filing requirements. On the other side, commentators and lawmakers who oppose greater government involvement in healthcare have disputed the study’s findings. The issue of medical bankruptcies continues to be a focal point in the healthcare debate.

Several other studies have examined medical debt in bankruptcy. Using a variety of methods, these studies have alternatively sought to support the Warren study, refute it, or replace it as the authoritative source on medical bankruptcies. The studies have produced a wide range of estimates for medical debt, feeding opposite positions in the debate over healthcare policy.

This study seeks to close that gap by drawing upon medical debt and other data from consumer bankruptcy cases filed in 2013 and responses to a nationwide survey of recent bankruptcy filers. The data adduced in this study shows that medical bills are the single largest causal factor in consumer bankruptcy — but not to the degree found in the study cited by President Obama. My study concludes that medical debt is the predominant casual factor in 18% to 26% of all consumer bankruptcies.

It is important to stress that in most cases, no single element can be cited as the “cause” of the bankruptcy. The decision to file bankruptcy is typically the product of factors such as long-time financial patterns, family and lifestyle decisions, job loss and sudden adverse events, advice from others, and, ultimately, the individual debtor’s perception of the value and utility of filing bankruptcy. Accordingly, the purpose of this article is not to establish a bright line definition of “medical bankruptcies,” but rather to look at medical debt as a causal factor of consumer bankruptcy.

Keywords: Medical Bankruptcy, Health Care, Affordable Care Act

Suggested Citation

Austin, Daniel A., Medical Debt as a Cause of Consumer Bankruptcy (2014). Maine Law Review, Volume 67, No. 1, pp. 1 - 23 (2014), Northeastern University School of Law Research Paper No. 204-2014, Available at SSRN:

Daniel A. Austin (Contact Author)

Wenzhou-Kean University ( email )

88 Daxue Rd.
Wenzhou, 325060

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