This has been a difficult year for many families’ finances and debt has become overwhelming. In one area, medical debt, Credit Karma analyzed its 20 million members in this country in Aug. and found that they have $45 billion of this debt in collections which averages $2,200 per member. In addition to bankruptcy, there are other options to deal with this debt.
Experts anticipate this debt will continue to rise over the next few months because there is a 180-delay delay before unpaid medical debt appears on consumer credit reports.
Another survey during the pandemic revealed that 56 percent of adults in this country had their medical debt sent to collections. Almost two-thirds owe under $5,000 and five percent owe more than $50,000 according to a Debt.com survey performed from June 17 to July 6.
Dealing with collections
Negotiating with the health care provider and insurance company can help prevent debt being sent to collection agencies.
After your bill is sent to collections, verify that it is valid to avoid scammers. Collection agencies must send a written explanation of your bill within five days of your request.
You should dispute any errors in your bill or contact the health care provider or your insurance company. Collection agencies may agree to repayment plans and a reduced payment.
Debts can lower scores after being reported on credit reports. There is a less of an impact with newer scoring such as FICO9 and VanatageScore 4.0, but all creditors do not use these models.
Consumers may consider resolving debt such as credit card or loan debt first because these usually involve higher interest.
Avoid using your credit card to pay off debt because a higher balance leads to a higher credit utilization ratio. This harms credit and there may be additional interest or fees.
Negotiating a plan with your provider may reduce debt or allow repayment over time. Find out if there are any additional fees.
Hospitals may have financial assistance programs. But there are financial qualifications regarding income, assets and whether the care was a medical necessity.
Home equity such as HELOC or cash-out refinance allows consumers to use equity in their homes to pay medical debt. But HELOCs permit consumers to borrow money with a revolving line of credit against their house.
Medical loans may be unsecured. However, these are usually an option for consumers in a secure financial condition because its criteria include credit history and income.
Bankruptcy may also be an option to deal with this debt. An attorney can provide reasonable options and develop a plan that helps protect you.