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Financial Tips

Life and Credit : Manage Medical Debt Effectively


Manage Medical Debt Effectively

It can happen when you least expect it. Medical bills resulting from illness and injury can put a major chink in your financial armor. As health care costs escalate and companies seek to cut corners, even those with insurance find their coverage limited, forcing them to come out of pocket. Even more disturbing: Recent studies show that medical debt is rising, and is a contributing factor in personal bankruptcies. A study of medical debt released August 2008 by Commonwealth Fund reveals some startling statistics:

  • Nearly two-thirds of US adults under age 65 -- 116 million people -- had medical bills problems or debt.
  • One-third of US working-age adults spent 10% or more of their income on out-of-pocket medical expenses and health insurance premiums.
  • 39% of those with medical bill problems had used up all of their savings.
  • 30% of those with medical bill problems had taken on credit card debt.

How to manage medical debt:

  • Avoid paying your medical bills with credit cards or loans – Medical debt doesn’t usually carry any interest, so avoid paying for health care expenses using credit cards and loans. If you have used credit to pay medical bills, contact a credit counseling agency like Credit Counselors right away!
  • Don’t be too quick to put your home on the line – The stakes are even higher when you turn your unsecured medical debt into secured debt backed by the value of your home. Defaulting on a mortgage can cost you your home.
  • Leave your retirement savings intact – Yes, savings are for a rainy day. Retirement savings will eventually be a source of income. Look at other repayment options before borrowing against your future.
  • Ask about a payment plan from your care provider – It doesn’t hurt to ask your care provider if they offer repayment plans. Some hospitals and clinics try to ease the financial burden caused by illness by establishing installment payment plans or even settling some of the total debt.
  • Reach out for help – A nonprofit credit counselor, like those at Credit Counselors, can provide an objective, professional perspective on your financial situation. They will work with you to craft an action plan to pay down debt and secure your future.