Medical Debt: Restoring Your Finances After Restoring Your Health
Skyrocketing medical expenses are making it difficult for many Americans to keep up with their medical bills. While these debts can negatively affect credit scores, those struggling to make ends meet have options. Nearly all medical debts can be discharged in bankruptcy.
In 2012, the average cost of healthcare for an American family of four will increase to $20,728, according to the Milliman Medical Index. Not surprisingly, these high healthcare expenses place a burden on many American families. The Centers for Disease Control and Prevention reported that during the first half of 2011, one out of every five people in the United States was part of a family that had problems paying medical bills. Further, one out of every 10 people was in a family that was unable to pay their medical bills altogether.
How Medical Debt Can Affect Your Credit Report
Many Americans are discovering that trouble with medical bills can negatively affect their credit score. This is true even in cases where the insurance company or health care provider makes an error.
Not only are health care costs soaring, but the frequency of medical billing errors is shockingly high. In 2011, the amount of erroneously processed claims by commercial health insurers increased to 19.3 percent, up 2 percent from 2010, according to the American Medical Association.
The Commonwealth Fund, a nonprofit research group, reported that in 2010, about 9.2 million people were sent to collections because of medical billing errors. This represents over 30 percent of the 30 million people who were sent to collections because of unpaid medical bills that year.
Even those with perfect credit histories can be severely affected. “It wouldn’t surprise me if their score dropped by 100 points or more,” said Frederic Huynh, a principal analytic scientist at FICO, a popular credit score report company.
Once a medical bill negatively affects your credit score, it cannot be removed for seven years. As such, it is critical to check your credit report often to ensure unpaid bills are not damaging your credit.
Medical Debt Is Dischargeable in Bankruptcy
Those faced with mounting medical bills should know there are ways to get relief.
For instance, medical debt can be discharged through bankruptcy, allowing for a fresh start without the burden of impossible medical expenses.
In fact, medical bankruptcies are more common that most might realize. A study published in The American Journal of Medicine in 2007 reported that 62 percent of bankruptcies were due, at least in part, to illnesses or medical bills. Of those, 92 percent had medical debts over $5,000. From 2001 to 2007, the number of bankruptcies caused by medical issues increased by almost 50 percent.
If you have medical debt that you are struggling to repay, contact an experienced New Jersey bankruptcy attorney who can help you understand your options.