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When Unpaid Medical Bills Damage Credit, Bankruptcy May Offer Relief

It’s not just unpaid credit card bills and mortgage payments that hurt your credit. Increasingly, Americans are seeing their credit scores drop when their medical bills wind up in collections.

A recent study by the Consumer Financial Protection Bureau shows that people with unpaid medical bills see lasting impacts to their credit records – even when they exhibit responsible behavior in other aspects of their financial lives.

For instance, when consumers had medical collections but paid all their other bills, their credit scores averaged 10 points below what they should have been. And the effect appears to linger: Even when people pay off their medical collections, their scores remain 16 to 22 points lower than would be expected based on their financial behavior.

Medical bills are notoriously challenging for consumers because they are frequently expensive, hard to understand and easy to miss. But allowing them to go unpaid – and, as a result, trash your credit – can create a snowball effect that raises interest rates, limits the ability to get credit and even threatens your paycheck, assets and home.

By being vigilant, however, you can ensure medical bills don’t get the best of your credit – and you.

Track Bills Closely

Being properly insured goes a long way toward helping you manage your bills. However, dealing with insurance companies can also complicate the payment process. Many people don’t realize their doctor or hospital bills have gone unpaid because they naively assumed their insurer paid the bill.

Just because a bill has been submitted to your insurance provider, doesn’t mean that it’s been paid. Take the time to read every bill you receive in detail. If you see a bill has gone unpaid, make sure to call your medical provider and insurer to see what’s going on. Until you’re sure the problem has been resolved, follow up with phone calls periodically. If the insurance company drags its feet, you may choose to pay the bill and seek reimbursement later, rather than risk potential credit damage.

Yes, keeping such close tabs on your medical bills can be a hassle. But remember, it’s far easier to deal with bills today than to deal with bills and medical collections tomorrow.

Avoid Collections

Sometimes you may not be able to afford a bill that your insurance provider won’t cover. However, ignoring the bill won’t make it go away – and will only make your situation worse in the long run.

If you can’t pay a medical bill outright, contact the medical provider. Many offices and hospitals are willing to work out payment plans with patients. Even if they’ve already sent the bill into collections, you may be able to ask them to reclaim the account from the collections agency in exchange for your timely payments.

Seek Help

When all else fails, get help. Your medical provider should be able to determine if you qualify for discounts or even financial assistance, depending on your income. If you have large medical bills, or medical bills in combination with other types of unsecured debts such as credit card bills, bankruptcy may be able to offer lasting relief.

Chapter 7 bankruptcy often has the ability to erase medical bills and many other forms of debt quickly and completely, allowing for a fresh financial start.

If your family is overwhelmed with medical bills or other debts, an experienced DebtStoppers bankruptcy attorney can determine whether bankruptcy could be a realistic option for you. Contact DebtStoppers today to schedule your free no-strings-attached personal debt evaluation – and get started on the path to financial freedom.

Resources:

Prevent Medical Bills From Spoiling Credit, by Liz Weston, Bankrate.com

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