The Sad Truth about Bankruptcy

Jeff Brown, MD, CPE

Physician's Money Digest, October 2007, Volume 14, Issue 10

Ouch! Doctors aren't accustomed to seeing the "B" word in conjunction with their financial affairs. Isn't our profession stable? That's what we were led to believe. It was implied that in exchange for years of long hours and low pay during our training we would receive a guaranteed economic future.

All-consuming Debt

My how the economic landscape has evolved! For young doctors, the completion of training now brings with it an average student loan debt of six figures. And for those who want to go into solo private practice, the cost is another six-figure debt—if you can even get another loan. No wonder so many new doctors are looking for a guaranteed salary in a group setting.

In addition to trying to earn a living wage, the years of forced financial discipline often demand a little rewarding: a new house for an expanding family, a replacement for the old clunker that saw you through school, a new wardrobe to replace hospital whites befitting an actual practitioner, and so on. Thank goodness for credit cards. Or not.

I knew a doctor who went out on a limb to build his practice by maxing out some 30 credit cards. He was lucky to get an HMO contract just in time to save him from the "B" word, but an increasing number of doctors aren't so lucky. Easily obtained credit card debt is turning out to be just as crushing for doctors as it is for everyone else. That's partly why the credit card companies lobbied so hard this past year to toughen up the requirements for declaring debt relief through bankruptcy.

An Investment in Bankruptcy

I would be remiss if I left the causes of physician bankruptcy only to school debt and pent-up demand for the better things in life. No, we're also guilty of investing our money poorly. Gold mines in Costa Rica and B movie productions are only two of the ideas I’ve overheard bandied about in the doctors' lounge. And I’m sure that we've all seen how a lack of even basic business education has put many otherwise busy and well-trained physicians on the ropes financially from mismanagement of their small businesses.

Bankruptcy is a very painful subject, especially for doctors who are working hard, doing a good job for their patients, and who aren't supposed to have to deal with this concept. The first step to avoiding bankruptcy is to realize that no one is immune to it, even hardworking doctors.