First, you'll start receiving late-payment notices. Eventually, the medical provider might sue you and get a money judgment. Then you could face wage garnishment , a bank levy, or the placement of a lien against your real estate —and you might not be able to reverse some of the consequences in bankruptcy. If you have good credit, you might be able to resolve your large medical bill by taking advantage of one of these options. To start, make sure you've resolved all insurance payment issues.
Once you have gotten all of the available insurance coverage, consider negotiating a settlement with the creditor. If the bill was for uninsured medical costs, then the medical provider might waive a percentage of the bill. Many hospitals and other medical providers routinely waive or discount bills for uninsured patients.
Most hospitals have assistance programs that, if you qualify, will give you free or reduced hospital care, depending on your level of income. Also, non-profit hospitals that enjoy federal tax-exempt status might have to go easier on you and other cash-strapped patients when it comes to medical billing.
This might apply to you. You should contact your hospital's financial aid counselor to find out more information and apply for applicable coverage. To learn more about these and other options, see Managing High Medical Debts. If you can't settle the debt and it looks as if the creditor may pursue you for payment, then your good credit is going to take a hit anyway because a collection action will show up on your credit report.
Also, if the provider sues you and gets a judgment, it can garnish your wages or take other collection action. Not only can filing for bankruptcy wipe out your debt, but the sooner you file, the sooner you'll be back on the road to financial recovery. If you don't earn much money and have assets with little or no equity, then a Chapter 7 bankruptcy might be a good choice for you.
You don't have to have a certain number of debts. Bankruptcy can be good for the economy because the affected people become contributing members of society again. Instead, medical debt, as well as all the other debt you have, is paid by your estate. And by estate, we mean all the assets you owned at death. Although all functional aspects of filing for bankruptcy apply to this specific reason as well, discharging medical bills is not one of them, regrettably. A bankruptcy record stays on for ten years, which can make renting or buying a house or getting a loan difficult.
Sometimes, bankruptcy can even restrain your job prospects. A very unpleasant side of declaring bankruptcy is the risk of losing your home. However, that depends on the state. For instance, facts on medical bankruptcies by state show that in Delaware, someone could lose most of what they have due to the seizure of assets. Furthermore, the additional expenses accompanying the bankruptcy, like chapter filing with an attorney, can increase in urban areas. It goes without saying that a lot of Americans are facing unmanageable medical bills due to coronavirus care.
So, what happens if you can not pay medical bills? Americans are financially vulnerable to this virus due to their deeper problems with how they pay for health care, which include:. Moreover, medical creditors are better to work with compared to other debt creditors. Those medical bills will stay in the billing department for as long as possible before being sent off to a collector and become medical debt collection.
Furthermore, some healthcare providers and doctors are willing to accept a tiny amount of the bill on an installment plan each month. Finally, the medical debt may not affect your credit score much since medical creditors seldom belong to credit reporting agencies.
Elderly patients who might be at risk should educate themselves on how to protect their savings if the worst happens. However, in some circumstances filing for bankruptcy because of unpayable medical bills is the best way out of a grim situation. This kind of bankruptcy is caused by medical debt. In some cases, people could experience this type of bankruptcy due to a combination of reasons in addition to medical bills, such as job loss. Comparing all the listed debts that led to bankruptcy, we can easily join the dots between bankruptcy and medical bills.
The latest data shows that around Furthermore, nearly ten million adults who have health insurance coverage struggle with healthcare-related bills, so we can see that people file medical bankruptcies with insurance , too. Many households face challenging out-of-pocket payments because of high-deductible insurance plans.
Unfortunately, the number of medical bankruptcies since Obamacare continues to increase. Although insurance under the Affordable Care Act aims to give more people coverage, it does not resolve the issue—millions of people with year-round, full coverage are still stunned by medical costs. Bankruptcies because of medical debt represent about For more than 11 million patients, the vicious cycle forms by taking additional credit debt to cover growing medical bills.
Unsurprisingly, the deficit only mounts due to the higher interest rates charged for unpaid balances. Another 15 million Americans deplete their savings to fund medical bills. Nevertheless, around ten million patients will be unable to pay for rent, food, and utilities because of devastating medical bills, leading to medical bankruptcies in America.
While you may not ultimately repay all of what you owe, you will make monthly payments toward your debt. As a result, your healthcare provider may end up collecting more of what you owe. Filing for bankruptcy for relief from medical debt is not without its consequences. There may be better options to help you preserve your credit and get back on track with your debt payments. Working with providers directly could open up new possibilities, like an interest-free repayment plan, for example.
A credit counselor can help you get your finances on track by working with you to set up a budget, or helping you get on a debt management plan with your creditors. Many credit-counseling agencies are nonprofit and offer their services at no cost. But it could also be helpful to have a professional help you explore your options before then. You can find an approved agency through the U.
Trustee Program website. Whether you should file Chapter 7 or Chapter 13 is dependent on the type of debt you have and whether you want to keep your assets.
Congress also has mandated that all coronavirus testing be covered in full by group health plans or health insurance issuers. Credit Karma will update this section as more information becomes available. Image: Senior couple looking at paperwork and using laptop. In a Nutshell Bankruptcy can offer a fresh start to someone overwhelmed by medical bills. But filing for bankruptcy can also affect your other debts and assets. Advertiser Disclosure We think it's important for you to understand how we make money.
About the author: Sarah C. Brady is a San Francisco—based financial consultant, workshop facilitator and writer.
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