cover_story (2005-30)

Photo with no caption
Photo with no caption
Photo with no caption

Debt Draws Lifeblood

Medical costs, divorce, job loss, plus credit cards equals bankruptcy

"We do see quite a few medical bills, but that's not the whole story."

"You can't borrow your way out of debt." — Judge Thomas Stinnett

"When cars are financed for six to eight years, it's not long before the debt is much greater than the value of the vehicle."

Debt Draws Lifeblood

Katherine “Kathy” Sharp sits in her tiny, immaculate apartment in East Knoxville and explains, matter-of-factly, how lingering medical bills she was unable to pay forced her to file for bankruptcy early this year.

  Kathy Sharp’s case is far from unusual. A joint Harvard Medical School/Harvard Law School study of personal bankruptcies in 2004 concluded that 48 percent of those filings were driven by medical bills. In Tennessee, one of a half-dozen states in the study, that percentage was a little over 50 percent—31,172 of 61,910 bankruptcies, affecting an estimated 86,500 Tennessee family members.

  “If I had one thing I’d emphasize, it would be this: You can’t borrow your way out of debt,” says Judge Thomas Stinnett, the bankruptcy judge in the Chattanooga federal court. Judge Marcia Parsons of the Greeneville bankruptcy court, seconds that sentiment, but goes on to explain that the causes of bankruptcy are “exceedingly complicated,” and no two are alike. In her court, she says, “We do see quite a few medical bills, but that’s not the whole story—a lot of credit-card debt, some of it to pay medical bills; job loss; and lots of divorce.” Filings often occur “six months before, or six months after, divorces.”

  Total bankruptcies have been on the increase in East Tennessee over the last 10 years, in keeping with state and national trends. In the first four months of each of those years, filings have grown from about 4,500 in 1996 to exceed 6,000 in each of the past four years, with 2003’s total for January through April being the highest so far at about 7,000 filings. The annual total of 20,945 filings in 2003 set the record for East Tennessee. The Greeneville court’s filings have been growing faster than have Knoxville’s or Chattanooga’s in the same period, though the trend has been up in each of those courts too, and the percentage of Chapter 7s vs. Chapter 13s has been likewise growing, districtwide, from about 50 percent in 1996 to 70 percent so far in 2005.

"You can't borrow your way out of debt." — Judge Thomas Stinnett

  “I haven’t seen a real uptick yet,” Mayer said last week, but he pointed out that there were still almost three months to go before the law’s full impact is felt. “If you make above the median income, you’ll be forced into [Chapter] 13,” he explains, which led him to believe Chapter 7s would be filed in droves before the deadline.

  Tom Dickenson, a creditors’ attorney in Knoxville, says medically driven bankruptcies were perceptibly on the upswing from the mid-1980s to the mid-’90s. “They weren’t as prevalent after TennCare,” he says.

© 2005 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Comments » 0

Be the first to post a comment!

Share your thoughts

Comments are the sole responsibility of the person posting them. You agree not to post comments that are off topic, defamatory, obscene, abusive, threatening or an invasion of privacy. Violators may be banned. Click here for our full user agreement.

Comments can be shared on Facebook and Yahoo!. Add both options by connecting your profiles.