Dealing with Medical Debt: A Guide to Managing Unaffordable Medical Expenses

Medical debt can be overwhelming, and it’s a reality for millions of Americans. According to a 2022 poll from the Kaiser Family Foundation (KFF), nearly half of Americans are holding onto medical debt. This can lead to a cycle of debt that’s difficult to escape, especially when you factor in premiums, deductibles, co-pays, and uncovered expenses.

Meet Sam and Alison, a couple who found themselves in this situation after a sudden illness left them with $50,000 in medical bills. They put the bills on their credit cards, hoping to pay them off over time. However, after five years, they’ve barely made a dent in their debt, and they’re struggling to make the minimum monthly payments.

The Consequences of Unaffordable Medical Debt

Sam and Alison’s situation is not unique. Many people struggle to pay their medical bills, and it can have severe consequences. According to the Federal Trade Commission (FTC), debt settlement programs can be risky. These programs offer to negotiate with creditors on your behalf, but they often encourage you to stop making payments to your creditors. This can lead to even more debt, including late fees and interest.

Another option is to work with a credit counselor to create a debt management plan. This can help you make a plan to pay off your debt, possibly with lower interest rates or waived fees. However, be wary of credit counselors who don’t offer any free information or charge you a lot of money before they do anything.

Bankruptcy: A Last Resort

For some individuals, the best course of action when it comes to unaffordable medical debt might be bankruptcy. However, this should be considered a last resort, as it can have long-term consequences for your credit. Before filing for bankruptcy, you’ll need to undergo pre-bankruptcy credit counseling and pass a means test to qualify for Chapter 7 bankruptcy. With Chapter 7 bankruptcy, you’ll need to liquidate all your assets that aren’t exempt, while for Chapter 13 bankruptcy, the court will approve a repayment plan that lets you pay off some of your debts in three to five years.

It’s essential to remember that bankruptcy doesn’t get rid of debt related to child support, alimony, fines, taxes, and most student loans.

Seeking Help: A Non-Profit Credit Counselor

For a couple like Sam and Alison, talking to a non-profit credit counselor can be a good first step to help decide which option makes sense for them and their family. A non-profit credit counselor can provide guidance and support to help you manage your debt and make a plan to get out of debt.

By understanding your options and seeking help, you can take control of your debt and work towards a brighter financial future.