Declaring bankruptcy can help eliminate burdensome medical debts.
According to a recent study by Nerd Wallet, medical bills are the leading source of debt in the US, as well as the leading cause of bankruptcy. Medical debt now comprises 38 percent of the total amount of debt in collections in this country, with over $21 billion being collected each year.
Why Medical Debt is Growing
There are several different factors contributing to ballooning medical debt among Americans.
First of all, there is the fact that medical expenses are increasing even as incomes are decreasing. Between 2012 and 2013, medical expenses rose by about $1,800 for the average American family, while the median income decreased $2,300.
Secondly, the medical billing system is rife with errors. When consumers fail to notice and dispute these errors early, it can become increasingly difficult to set matters straight. Looking at data compiled from Medicare Compliance Reviews conducted by the Office of the Inspector General in 2013, NerdWallet found that 49 percent of the claims contained billing errors resulting in a 26.4 percent overcharge for care provided. According to experts such as the President of the Medical Bill Advocates of America, error rates in non-Medicare billings may be even higher.
Strategies for Escaping Medical Debt
When it comes to preventing medical debt from destroying your finances, a combination of preventative and reactive methods are needed.
First of all, remember that fees for various medical services can vary widely from provider to provider. Whenever possible, check prices first and make sure you choose the best value.
Secondly, be sure to read all your medical bills closely. Report any duplicate charges or incorrect billing items to the provider right away. Also, be sure to contact your insurance company if you have any questions about the amounts they have covered.
Third, react quickly when you have trouble paying. It may take a few tries, but you can most likely get the hospital or care provider to agree to a payment plan with a negotiated rate that will enable you to clear the debt on your time and your budget. Negotiating now will be much easier than waiting until the debt goes into collections.
Finally, if your medical debt does go into default and gets sold to a collection agency, consider filing for bankruptcy to discharge it. You will take a temporary hit to your credit score, but in most cases a bankruptcy attorney can help you eliminate the debt without forfeiting all your assets.
