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Consumer bankruptcies ease slightly, but medical bills a stubborn foe

Despite adding jobs in certain sectors, unemployment increased in 28 states in July


Last-minute update: LA Times' blog about Congresswoman's outburst over unemployment in California fits right in with the following post--"Rep. Maxine Waters: 'The tea party can go straight to hell' "

While politicians and their parties continue the blame game over the debt-ceiling shootout and S&P's apparently toothless credit downgrade, unemployment continues to ravage the personal economies of millions.

June, July personal bankruptcies? About 233,000

True, the rate of consumer bankruptcies has let up again, for the seventh time in 2011. Still, nearly a quarter-million consumer bankruptcies were filed in June and July, and bankruptcies stemming from medical bills remain a chronic problem: People without jobs who get seriously ill or injured face a triple whammy. Lacking employment, they also probably have no insurance--or their tide-me-over coverage such as COBRA is about to run out.

Medical bills can lead to downward spiral

Yet, they feel the medical bills must be paid. Otherwise, treatment ends. All too often, these payments get tacked onto a credit card. But with no job, paying down the credit card is no easier than paying the original medical bill.

As noted in an Aug. 18 blog at The New York Times' site:
People who have lost their jobs, but are continuing their group coverage under the federal law known as COBRA, may find it difficult to make the higher premium payments and end up putting them on their credit cards if they can. Another scenario, . . . noted [by Michelle Jones, CredAbility's senior vice president of counseling], is that if patients need continuing therapy, they may have to put payments on their credit cards, or they can’t continue treatment: “If they don’t pay, services won’t be provided.”

Medical debts can be particularly stressful because they tend to be referred to collection agencies quickly, since it’s expensive for clinics and hospitals to chase payments that aren’t covered by insurance.

Springing the credit-card trap

Then, of course, the patient is in the credit-card interest trap.

In reaction to the NYT blog, a HuffPo writer put it this way:
About a fifth of people seeking financial counseling this year and last said debt related to medical bills was their main reason for deciding to enter bankruptcy -- up from as low as 12 percent in the previous two years -- according to counseling agency CredAbility, the NYT reports.

A bitter combination of forces has left many Americans unable to meet the obligations that just a few years ago would have been manageable. Payrolls shed millions of jobs in the months after the financial crisis, as employers contended with a shrinking economy. And home prices entered a punishing decline, eroding the value of many people's most valuable asset.

A high number of people who had never before had serious trouble paying their bills now had a "negative credit experience," according to a Deloitte survey late last year. One in seven of these previously creditworthy borrowers entered default in the wake of the economic downturn.

With a job loss often comes the loss of health insurance, making it even more difficult for Americans to pay for care. Many have resorted to running up credit card debt to pay off medical bills, the NYT notes.

Only nine states posted lower unemployment

According to an Aug. 22 piece in International Business Times, "In July, 28 states registered a higher unemployment rate, while only nine showed a lower unemployment rate, with the overall U.S. economy adding 117,000 jobs, according to data provided the U.S. Labor Department.

"Further, 13 states recorded no increase. A year ago, in July 2010, unemployment rates fell in 37 states and rose in seven states.

"Nevada had the nation's highest unemployment rate, at 12.9 percent, up from 12.4 percent in June. California's rate rose to 12 percent from 11.8 percent in July.

"North Dakota reported the lowest unemployment rate, at 3.3 percent, a touch higher than July's 3.2 percent rate."

'Official rate' not accurate for true out-of-work numbers

Of course, the rates cited are the department's so-called "official unemployment rate," taken from row U-3 of the BLS Table A-15. A more accurate approximation of people not working or barely working is found in row U-16, which shows 16.8 per cent (seasonally adjusted) in June 2010, down to 15.7 in March. Since then it has quivered up and down: 15.9 in April; 15.8 in May; rising to 16.2 in June; down slightly in July to 16.1.

From the Labor Department press release cited earlier:

Regional Unemployment (Seasonally Adjusted)

The West reported the highest regional unemployment rate in July, 10.5 percent, while the Northeast recorded the lowest rate, 8.2 percent. Over the month, three regions experienced statistically significant jobless rate changes, all increases: the Midwest (+0.2 percentage point) and South and West (+0.1 point each). Three of the regions registered significant rate changes from a year earlier, all decreases: the Midwest (-0.8 percentage point), West (-0.5 point), and Northeast (-0.4 point). (See table 1.)

Among the nine geographic divisions, the Pacific continued to report the highest jobless rate, 11.2 percent in July. The West North Central again registered the lowest rate, 6.8 percent. Over the month, two divisions experienced statistically significant unemployment rate changes: the East North Central (+0.3 percentage
point) and Pacific (+0.2 point). Over the year, the East North Central recorded the only significant rate change among divisions (-1.0 percentage point).

Consumer bankruptcy for yourself

If you're considering filing for consumer-level bankruptcy protection, be aware that legally you can file the petition yourself. You can also hire "advocates" who can point you toward the correct forms and provide a minimal amount of information--although they can not offer legal advice. That being said, bankruptcy experts and legal authorities recommend hiring a trained, experienced attorney who keeps up with changes to the code and is familiar with all the principals in your area's bankruptcy court.

Consider free case evaluation

If you're interested in learning more about the power of bankruptcy protection, please, browse our site for more information; if you need help filing for bankruptcy protection for yourself, consider signing up for a free case evaluation.

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