Approximately a quarter of homebuyers and renters carrying personal debt were denied approval for either a mortgage or lease, according to Zillow’s recent report on Consumer Housing Trends. It was reported that medical debt had the most impact on homebuyer’s budgets and whether they would qualify for a mortgage.
While student loan debt has been reported as being a major factor keeping many younger people from purchasing a home, it turns out medical debt is an even bigger factor.
According to Zillow, medical debts are more likely than any other type of debt to keep American consumers from either purchasing or renting a new home. They conducted a survey which showed that 38 percent of people who owe money for medical or healthcare expenses say they were turned down for renting a home or taking out a mortgage due to those debts. According to Zillow, this group represented the largest rate of rejection- more than any other kind of debt, including credit cards and student loans.
Zillow found that one in five potential home buyers who are in the millennial generation are also burdened by large amounts of medical debt, which keeps them from being able to purchase any real estate.
It is reported that an estimated 72 million people are struggling with medical debt. While housing affordability may be improving, people are not earning more in terms of income, and the costs of medical care are skyrocketing. What results is Americans are carrying more debt than they have in years past, and this debt is keeping them from making big purchases, such as a home purchase.
Additionally, if the consumer is not able to pay their medical bills, having them turned over to collections can cause some serious damage to that person’s credit score, making it even harder for him or her to obtain financing necessary to purchase a home. Unpaid medical bills directly affect a consumer’s Debt to Income (DTI) ratio, which is used by lenders when financing a home purchase. Lenders take the person’s monthly payments for selected financial obligations and divide them by the person’s gross monthly income. Mortgage companies will look at these figures to see if the borrower can take on the new mortgage obligation on top of other financial liabilities the person has. While DTI does not consider medical bills that are still being processed by insurance, unpaid medical bills certainly can have a negative impact on the person’s chances of receiving financing.
How is Medical Debt Handled in Bankruptcy?
In bankruptcy, medical debt is treated the same as credit card debt. Medical bills are listed as general unsecured debt and can be easily wiped out in a Chapter 7 bankruptcy filing. Making the decision to file for bankruptcy is never an easy one. It can be difficult to get past some of the myths associated with filing for bankruptcy. Sometimes by waiting, an individual facing a lot of debt can find himself or herself in an even worse situation. Filing for bankruptcy can help protect valuable assets, including your home, car, IRA and social security. It will put an end to wage garnishment and any lawsuit being filed to collect on the debt, thanks to the protections of the automatic stay.
Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.
Bloomberg News: Medical Debt is the No. 1 Dealbreaker for U.S. Housing, according to Zillow.