Reducing the Risk of Bankruptcy

What is an article on bankruptcy doing here on a health insurance Web site? Sadly, because all too often heath care and bankruptcy go together. According to a 2005 Harvard study, almost half of the bankruptcies filed in 2001 were done so as a result of a medical crisis in the family. When you add job loss and family break-ups, two other life-altering catastrophes that have an impact on the family’s health coverage, the figure reaches as high as 95%.

New bankruptcy laws make it harder to file for Chapter 7 protection, which is, on balance, a good thing. Americans need to be more proactive about preparing for a rainy day, instead of crying “foul” when the rain starts falling. We aren’t the savers we once were, and we’re shockingly comfortable living on the edge. But the data from this Harvard study clearly show we are not a society of irresponsible spendthrifts. A sizeable majority of those studied who found themselves in bankruptcies did so because of unforeseen catastrophes that could happen to any one of us. These kinds of catastrophes are going to continue occurring, regardless of new bankruptcy laws. And that’s the point of this article: Everyone needs to be better prepared than they used to be.

What can you do to protect yourself and your family? Here are a few tips to avoid falling into the financial trap:

Always have health insurance for you and your family. Even if you have to get a so-called "catastrophic" or high-deductible plan, it's crucial to be covered. A good rule of thumb is to limit your maximum annual responsibility for medical costs to $5,000 -$10,000. You can find a variety of high-deductible health insurance plans in the individual and family health insurance market. InsureMeOnline.com can provide you with free quotes on plans in your area.

• Stay away from high interest credit cards. According to the Harvard study, many of those who file bankruptcy due to credit card debt have paid off the original amount, but were dragged down by interest and fees. Often the fine print hides fees and information on interest rate hikes.
• Save for a rainy day. Start an emergency savings fund to help you avoid going into debt to pay for unexpected bills. Every little bit helps.
• Don't take out a second mortgage to pay bills. In most states, that money you have in equity is yours to keep no matter what else is going on with you financially. If you live in a state that considers your home a protected asset, your home will be safe from liquidation to pay your debts. But by taking out a second mortgage to pay bills, you’re essentially doing the liquidation yourself. Check the laws in your state before even considering such a move.
• Avoid gaps in health insurance coverage. Consider a short term health insurance plan if you're in a transitional period. Short-term plans are typically very affordable and are designed to cover you from 1 to 12 months. If you're changing jobs, getting married or graduating from college, it's important to avoid any gaps in coverage that might leave you open to financial difficulties. InsureMeOnline.com is a great resource for short-term plans, so let us help.