Medical bills are classified the same as utility bills, credit card debt and payday loans. These are all examples of unsecured debt.
Almost everyone has some form of unsecured debt, probably in the form of credit cards. And, each month everyone has to pay their utility bills.
Simply being billed for your medical treatment won’t negatively affect your credit. It’s just like the monthly electric bill you get. The credit problems start when your bill is late.
If your insurance was supposed to pay the hospital but, for whatever reason, hasn’t paid, the hospital will likely send a collection agency after you and not the insurance company. So, through no fault of your own, your credit score could be affected by your insurance company’s actions.
If you are late on your medical bill payments, a hospital or doctor’s office may turn the bill over to a debt collection agency. This collection agency will then file a report with the credit monitoring agencies and your credit score will take a hit. If your bill continues to go unpaid your credit score may continue to drop.
At this time, you may also begin to receive phone calls and letters from the collection agency. If you are still unable to pay, your credit score may lower further. Collection agencies will continue to pursue the bills until they are paid, and they may even take legal action against you.
Collection agencies don’t care why you can’t pay your medical bills. They aren’t interested in how your recovery is going, and they aren’t concerned about the time you missed at work.
You may be tempted to just quickly pay off your medical bills with your credit card, but this can open another can of worms.
The interest rates on your credit card could mean that a $1,000 doctor’s bill could grow to $1,500 quickly. And late payments on your credit cards will harm your credit score just like medical bills in collection. Plus, your interest rates could go up, costing you even more.
If your medical bills – or other bills – are in collection, then your credit score has already taken a hit. To rebuild your credit you’ll need to get control of your debt.
Because medical bills are classified as unsecured debt they may be able to be completely discharged in a Chapter 7 bankruptcy filing. You could also include your other unsecured debt in this filing, like credit card debt.
Also, because of each state’s bankruptcy exemptions, you would likely be able to keep your house, car and other possessions if you qualify for a Chapter 7.
Another option would be to combine your medical bills with other debt, such as your mortgage, car payment and credit card bills, in a Chapter 13 bankruptcy court case. This process would order and probably reduce your debts while putting a halt to the harassment from collection agencies.
Either Chapter 7 or Chapter 13 bankruptcy could result in:
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