Does it hurt your business when people don't pay you the money that you're owed? Of course it does. But why do people not pay the money that they owe? After all, they're the ones who signed on the dotted line, right? That means they're legally obligated, so there's no good reason why they shouldn't pay up, right? So what happens when people stop paying? You contact them (if you can) and politely remind them to pay and sometimes even negotiate payment arrangements with them, and sometimes this works. But a lot of times they still don't pay. You get frustrated and throw your hands up in the air and sell off the account to a collection agency, right? For pennies on the dollar, which means you've lost a lot of money on the deal,not to mention the time you've already spent trying to get them to pay up.
So the collection agency goes after the deadbeat who didn't want to pay up, and all too often, what happens? The deadbeat declares bankruptcy, so everybody's out a lot of money (except the lawyers). Now there are a lot of deadbeats out there who do this on purpose, right? That's why legislation was passed a few years back to make it a lot more difficult to declare bankruptcy...but despite this legislation, in 2009 there were nearly seven hundred thousand bankruptcies, which probably played a major role in the more than 1.5 million foreclosures that year. It's not quite so bad now, but there' are still hundreds of thousands of bankruptcies (and concomitant foreclosures) each and every year.
But there's another factor we're not yet considering: bad credit. For every person who declared bankruptcy, there are quite likely several more whose credit scores tanked due to non payment of bills and it takes a long time to pull oneself back into the light of good credit. But when much of the consumer base has bad credit, what does that do to businesses? I think we can all agree that when too many people have bad credit, businesses as a whole make a lot less money, unless you're one of those vultures who prey upon the uncredit-worthy masses, that is.
But wouldn't it be nice if we could really cut down on the number of bankruptcies in America? And wouldn't it be nice if a lot fewer people had severe credit problems? Of course it would. But how, you ask with a cynical sneer, can we make that happen? Wave a magic legislative wand and sprinkle some of that proverbial fairy dust on peoples' finances and credit ratings? In a manner of speaking, yes. You see, it's well known that over half of all bankruptcies in America are due to health care costs. In fact, according to a Harvard study: Medical problems caused 62 percent of all personal bankruptcies filed in the U.S. in 2007, according to Harvard's researchers. And in a finding that surprised even the researchers, 78 percent of those filers had medical insurance at the start of their illness, including 60.3 percent who had private coverage, not Medicare or Medicaid. That was back in 2007, and it's likely worse now. What this study doesn't show, but would logically follow, is that there are millions more whose credit scores plummeted due to health care costs, "Gee, now that my wife found a lump in her breast, which should we pay, our car payment, or our health insurance payment?"
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