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Bankruptcy vs. payment plans for overwhelming medical bills

On Behalf of | Aug 30, 2021 | Bankruptcy |

Individuals with overdue medical bills may experience increased stress, which could worsen the health-related issue that led to their financial hardship. In some cases when a doctor’s bill appears high, an option may exist to negotiate with the insurance company or ask the practitioner to adjust it.

According to Health.com, it may take several months before a doctor or hospital assigns a debt for collection by a third-party organization. In 2020, however, approximately 21 million members of an online personal finance community noted a combined $45 billion worth of unpaid medical debts in collections.

Entering into payment arrangements

As reported by CBS News, medical bills made up the highest portion of Americans’ debts between 2009 and 2020. The Journal of the American Medical Association found that debt collectors had a right to pursue a record $140 billion of unpaid health care bills in 2020.

Hospital billing departments may, however, accept an affordable payment arrangement that does not include interest. Collection agents may agree to a reduced lump-sum payment to settle a debt, but a fee may apply.

Considering bankruptcy as an option

Many individuals cannot pay their medical debts because they lost a significant amount of time from work to seek treatment or recover. Some debtors turn to high-interest personal loans to cover their medical bills and find that their problems worsen.

For individuals with overwhelming medical bills, high credit card balances or other unmanageable debts, bankruptcy may offer a workable solution. Filing a Chapter 7 petition may discharge many or all consumer debts including medical bills.

Bankruptcy may provide debtors with a way to refocus their attention on recovering from a long-term illness or medical procedure. Relief from the stress of unpaid medical bills may also contribute to returning to full-time work sooner.