Oct 042008
 

I just watched a television ad aired by DividedWeFail.org1 that said:

1.85 million Americans go bankrupt due to medical bills in one year.

I can only deduce one fact from that statement: either AARP or U.S Courts2 need to fire their editors and proof-readers. Surely there's no way either of those organizations could have deliberately lied with an important election pending in November.

Here's my problem: The bankruptcy statistics published by U. S. Courts just don't match that number that's being touted by DividedWeFail.org.

Here's the facts: As of 2005, there are three types of bankruptcies:

  • Chapter 11 is primarily limited to a business restructuring, but also open to individuals with unsecured debt (like credit cards) exceeding $336,900 or secured debt (like mortgages) exceeding $1,010,650. While it's possible that some Chapter 11 filings are due to medical expenses, these filings make up a tiny percentage of annual bankruptcy filings (well below 1% in 2006).
  • Chapter 13 is primarily for individuals who are behind on their loan payments. When you file for this type of bankruptcy, you get an opportunity to pay down your debt and keep your assets.
  • Chapter 7 is for business or individuals and results in liquidation of assets. This type of bankruptcy is where large medical expenses fall.

With the exception of 2005 when Chapter 7 filings spiked to a whopping 1,631,011, the number of filings has never exceeded 1.2 million for any year since 1990, with the number of filings for 2007 being about 1/3 of what's being reported by DividedWeFail.org.

According to a study done by Harvard3, approximately one-half of the 1.4 million filings in 2001 were due to illness and medical bills. But the more interesting statement with respect to the Harvard study was this:

The study estimates that medical bankruptcies affect about 2 million Americans annually -- counting debtors and their dependents, including about 700,000 children.

Now wait a cotton-pickin' minute... it's all beginning to make sense. If a married man with eight children filed for bankruptcy because of medical expenses, would you think I was painting an accurate picture if I said "10 people went bankrupt due to medical bills"? Sure there were 8 kids affected -- and that's sad... but to say those 8 kids went bankrupt is simply inaccurate because their future credit rating is neither related to nor affected by their parents' bankruptcy.

If you're thinking straight, you'd tell me I was a blooming idiot. But the sad fact is that millions of misinformed voters will be quoting DividedWeFail.org between now and election day without ever knowing they've been duped. Thank you AARP -- once again you've mangled the truth beyond recognition.

References:
1 http://www.dividedwefail.org
2 http://www.uscourts.gov
3 http://www.consumeraffairs.com/news04/2005/bankruptcy_study.html

I'm not sure whether DividedWeFail.org ran out of ad money, got a clue about the error of their ways or got slammed one too many times for the misleading information I wrote about on September 3, but I'm not sure I really care... all that really matters is that they pulled that misleading ad.

The new one simply states "1000's of Americans go bankrupt every week", yada, yada, yada. Even if 1000's means 10,000, that's 1 million a year which is a little more than half of that ridiculous number they originally reported.