How to Avoid Medical Bankruptcy
Unable to Pay Medical Bills? Stop Medical Debt Collection Activity
It's official, medical bankruptcy is the main reason for personal insolvency. The American Journal of Medicine produced evidence showing that 62.1% of all 2007 insolvencies were connected to unaffordable medical and hospital expenses. This report will be released in August 2009. The pressure exerted by medical debt collection agencies on individuals with no realistic chance of repaying the money owed is behind these figures as debtors feel cornered and have no other alternative open to them.
Medical Bankruptcy Not Always Prevented by Health Insurance
Many of those with health insurance were also unable to pay their medical bills. The average unpaid debt of those filing for medical bankruptcy with no insurance was $17,749, whereas it was $26,971 for those without coverage. A total of 78% actually had health insurance coverage. These surprising figures are largely due to high insurance deductibles and pre-existing medical conditions. It is essential to keep deductibles as low as possible and commence health insurance coverage as early on in life as possible.
Don't Turn Medical Debt Into Credit Card Debt
Pressure from medical debt collection agencies when unable to pay medical bills is a huge problem. This regularly leads to that person opting to settle their bill with a charge card. Unpaid credit card debt will also lead to creditor harassment; problems are simply delayed for a few months. Worse still, it attracts a higher rate of interest meaning that the amount owed will spiral out of control far more quickly.
Consolidate Medical Debt
It may be possible to get a debt consolidation loan and put all hospital bills and associated expenses under one roof. Making an affordable monthly repayment over a defined term could provide the answer to those who are unable to pay medical bills due to inadequate insurance coverage or no savings. Always think carefully before turning unsecured into secured debt as defaulting on the agreement could lead to mortgage repossession.
Medical Bankruptcy Vs Alternative Debt Solution
If medical debt has already been settled with a charge card, consider a debt settlement plan or debt management program. It is possible to either write-off debt or manage the amount owed so an affordable sum becomes payable each month. The major negative of both debt solutions is that it can take considerably longer to clear the amount owed. Problems can also arise if a reoccurrence of the illness should arise.
Full-and-Final Settlement
If savings are available, don't send this to a creditor to reduce the amount owed without performing a few preliminary checks first. Those who are being pursued by a medical debt collection agency have already defaulted on the terms of the agreement. This means that the creditor deems it far less likely that they will ever receive full payment. It may be possible to use this lesser sum to negotiate a full-and-final settlement. Either negotiate personally or pay a fee to a professional to carry out this service. Always get the terms of any agreement in writing before sending payment.
Medical bankruptcy may seem like a drastic measure for those who are unable to pay medical bills. However, it means that an individual can become debt-free in just 4 to 6 months. Neither take the situation lightly or dismiss it as it could be the right answer. Always consult a qualified debt counselor before proceeding with any debt solution.
Sources
Girion, Lisa. (4 June, 2009). "Medical bills pay a role in 62% of bankruptcies, study says." Los Angeles Times.
commonwealthfund.org - August 2008
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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