Those emerging from a major surgery or serious illness know that in some respects‚ the recovery time goes beyond the physical.
In fact‚ our Woodland Hills bankruptcy attorneys know there are ways in which a financial recovery may be more painful.
As the fight over affordable healthcare rages on‚ medical bills are still compounding for many in this country‚ and some will find relief to be elusive. There may be ways to manage medical debt‚ with proper planning. However‚ not everyone plans on coping with a devastating injury or illness.
Medical debt is the No. 1 most common type of collection account. According to the Federal Reserve‚ it represents almost half of all reported collections in the U.S.‚ with 1 in 6 credit reports in the country containing some type of medical debt collection. Last year‚ 2 out of 5 Americans received a lower credit rating as a result of medical bills that had gone unpaid.
Some lingering legislative proposals would eliminate medical debt from credit reports altogether‚ as consumer advocates insist that the size of someone’s medical debt doesn’t necessarily reflect his or her creditworthiness. After all‚ it’s beyond your control if you are struck by a vehicle or your child develops cancer. Why should you be punished twice?
Still the fact remains‚ the damage these debts can do to your credit is profound. In the short term‚ you’ll find it tough to secure loans and lines of credit with reasonable interest rates‚ meaning this problem has the potential to spider out into other aspects of your financial profile.
Unpaid medical debts can stay on your credit score for up to seven years.
The one piece of positive news is that the newest version of the FICO score ignores medical debts under $100‚ which accounts for one out of every three outstanding medical bills. Also‚ there are efforts at the state level to help reduce the impact of inaccurate medical collection claims‚ which by some accounts is as much as 20 percent of medical claims. This includes people who were overbilled or charged for services never received. California state Rep. Gary Miller has proposed a law that would bar debt collectors from reporting medical collections for at least 120 days if the consumer is in negotiations with the insurer. The measure is currently still in committee.
In the meantime‚ most patients are going to have between 90 and 120 days to negotiate with the insurer and work out a payment plan with the provider. You want to make sure you act quickly. If you know that your going to be filing an appeal with the insurer‚ make sure to give your physician a heads-up so that the claim doesn’t go to collections before then.
Even then‚ there will be some situations in which a person’s medical debt becomes absolutely overwhelming. Having health insurance doesn’t always provide enough debt insulation. These bills can quickly pile up and become a major financial setback.
If you find your physical recovery has involved warding off not only infections and remissions but debt collections and creditor harassment‚ we can help you find solutions. Sometimes debt settlement is the answer. Sometimes bankruptcy makes more sense. It will depend a great deal on your individual situation.
If you are contemplating bankruptcy in Woodland Hills‚ contact Cal West Law to schedule your free consultation. Call (800) 568-0707.
Additional Resources:
How will unpaid medical bills hurt credit? Oct. 15‚ 2013‚ By Janna Herron‚ Bankrate.com