Medical debt is the No. 1 reason that people file for bankruptcy. An abrupt illness can lead to excessive medical bills that are even difficult to pay for people who have full-time jobs and health insurance. The medical debt factor has been on the minds of many people during the COVID-19 pandemic.
An estimated two-thirds of people who sought bankruptcy reported that medical illnesses were the main cause for their financial downward spiral, according to a 2019 study published in the American Journal of Public Health. In addition, the research disclosed that annually an estimated 530,000 American families file for bankruptcy because of medical issues and bills.
Negotiate, pursue payment plan
Before you choose the bankruptcy route – which will eliminate most of your medical debt – consider taking these initial steps:
- Make an inventory of your medical bills and review them: Hospitals and insurance companies may have made mistakes. Errors may include being billed twice for the same procedure or for a procedure that did not take place. Also, make sure to contact your insurance company if you wonder why insurance did not cover a specific procedure.
- Pursue negotiations: Advocate for yourself by contacting hospital billing departments. Do some research beforehand to understand the costs of comparable medical procedures. This will prove to your advantage. It is not unheard of for medical care providers to accept partial payments for a bill.
- Pursue government assistance: You and your family may qualify for some state and federal assistance. A report released in February of this year by the Consumer Financial Protection Bureau noted that people with near lower incomes have significantly higher rates of medical debt.
- Agree to a payment plan: This, too, would be part of your negotiation efforts. Some hospitals may agree to either a low-interest or interest-free payment plan.
Medical debt may seem overwhelming. However, you can overcome it.
The bankruptcy option
In some situations, filing for personal bankruptcy may seem to be the logical option to resolve your financial situation, primarily caused by medical debt. This strategy is worth considering and will allow you to get back on your feet.