Learn More About The Facts Of Medical Debt
Accidents and illnesses can happen to virtually anyone. Even if you are insured, your policy may or may not cover everything. Consequently, due to the high cost of medical care, your medical debt may soon spiral out of control.
Fortunately, those struggling with medical debt are not helpless, provided that they seek out the help of a lawyer before things get worse. Below are some of the most frequently asked questions about medical debt and bankruptcy.
Can Unpaid Debt Harm My Credit Score?
If you have unpaid medical bills, they can eventually hurt your credit score. Although doctors and hospitals do not routinely report your debts to credit reporting agencies, they do turn unpaid debts over to collection agencies that, in turn, report your outstanding debts. Unpaid medical debt can do significant damage to your credit score, causing it to drop hundreds of points. Even if your debt is eventually paid, it can stay on your credit report for up to seven years following the delinquency.
Do I Need To File Bankruptcy Because Of Medical Debt?
If you are unable to pay your medical bills, you should consider bankruptcy or bankruptcy alternatives as options to address your problems. The astronomical cost of medical treatment in the United States makes paying for it out of reach for many Americans with average incomes, especially for people with high-deductible insurance plans or plans that do not cover needed treatments. As a result, unpaid medical bills are the leading reason Americans get into difficult financial straits, often seeking bankruptcy protection as a result.
Should I Use Credit Cards To Pay My Medical Debts?
Generally speaking, this is a bad idea. Due to the high interest, fees and late penalties charged by most credit cards, this can quickly cause the amount you owe to skyrocket. Although you will no longer owe payments to the hospital or physician, charging your medical bills will likely leave you with a larger overall debt in the long run, only now on your credit cards.
What Is The Medical Debt Relief Act?
The Medical Debt Relief Act is a proposed congressional bill that would help those struggling with medical debts. Specifically, it would prohibit medical debts from appearing on credit reports for 180 days after the debt is charged. Additionally, it would allow delinquent medical debts to be erased from credit reports within 45 days after full payment or settlement of the debt. Although this bill would help protect the credit scores of some of those with medical debt, it has an uncertain future, as it has stalled in Congress.
Can Bankruptcy Eliminate Medical Debt?
Yes. Although both types of consumer bankruptcy may potentially help, if you are struggling with a lot of medical debt, Chapter 7 may be the easiest and best option. This is because medical debt is treated as unsecured debt during Chapter 7 bankruptcy. Basically, this means that in most cases, medical debts are completely wiped out once you receive your discharge. There is no limit on the amount of medical debt you can eliminate with Chapter 7.
How Will Bankruptcy Affect My Credit?
It is true that filing bankruptcy can damage your credit score. However, it can be the fastest way for many people to return to financial health. If you are already behind on medical debt and other payments, bankruptcy can help you get back on your feet much sooner than other debt management tactics, because it swiftly gets rid of most of your debts.
Once you have been relieved of your debts, you can quickly return to making timely payments on your loans, credit cards and other financial obligations. Over time, this will cause your credit score to increase significantly. Assuming they practice financially responsible habits, most people who file bankruptcy are able to raise their credit scores to decent levels within one to two years after completion.
Filing bankruptcy is generally better than continuing to struggle with medical bills and other debts. Making late payments and increasing the amount of debt you owe will, over time, hurt your credit score more than filing bankruptcy would.
Learn More About Your Options
Although bankruptcy is an effective way to deal with medical bills, it should never be considered the “default” solution. To learn more about your options and the best way to approach your unique debt situation, contact my offices in Memphis, Tennessee, at 901-730-4958 or by
sending an email to schedule a consultation with an experienced bankruptcy attorney.