Medical Debt or Credit Card Debt? How to Avoid Medical Bankruptcy

Medical debt is causing sleepness nights for millions of Americans. Unpaid medical bills and pursuance from collection agencies, high APR credit card debt and even medical bankruptcy are some of the likely outcomes. Whilst financial assistance for medical bills is currently rather limited, there are several ways to deal with unaffordable expenses.

Medical Debt Statistics

- 116 million Americans under the age of 65 had accrued debt in-full or part as a result of medical bills.

- 39% had spent their savings paying medical fees.

- One-third of U.S. citizens between 18 and 65 spend greater than 10% of their disposable income on either health insurance or miscellaneous medical fees.

- 30% turned medical expenses into credit card debt.

- 28% of individuals are attempting to clear their medical bills with a series of monthly instalments.

- 27% experienced difficulty paying for medical expenses.

* Figures provided by the commonwealthfund.org in August 2008.

Credit Card Debt Behind Escalating Medical Bankruptcy Figures

According to the Common Wealth Fund, a colossal 21 million U.S. citizens had accrued credit card debt as a result of medical expenses. The typical process is as follows:

- Unpaid debts are passed on to a debt collection agency.

- A court judgement is taken out against the debtor by the healthcare provider.

- The debtor feels threatened and clears their medical bill with a credit card.

- The interest on credit card debt starts to climb. In order to rid themselves of this, the debtor declares medical bankruptcy.

How to Avoid Medical Bankruptcy

- A very high percentage of hospital bills are inaccurate. Whilst performing a manual inspection is possible, it may be better to use a professional service that has considerable experience with such matters. It is possible to reduce medical debt by thousands of dollars.

- Charitable assistance is rarely advertised, but may be available. Check to see if financial assistance is available as early as possible.

- Credit card debt attracts a higher rate of interest than medical debt. A Consumer Action credit card survey in July 2008 showed that the average rate of APR on an unpaid card balance was 13.54%. It is better to arrange a monthly repayment schedule with a medical provider as repayments will be a lot cheaper.

- If the repayment of credit card debt isn't affordable, medical bankruptcy isn't the only option available. Consider an alternative, such as debt settlement or a Debt Management Plan (DMP) in order to reduce monthly payments and become debt-free.

Whilst medical bankruptcy may still have a stigma attached, remember that well over a million people declare bankruptcy each and every year. You will not be alone. Filing under chapter 7 could mean that you are free from medical debts in as little as 4 to 6 months. The danger is that a medical condition will return as it is only possible to file once every 6 years.

Relevant Articles:
Ways to Clear Clear Medical Debt
How to Prevent Medical Debt

Sources

Prescription for paying your medical bills - mycesi.org

creditcards.com

commonwealthfund.org - August 2008

Consumer Action credit card survey - July 2008

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.