Medical debt is one of those problems which nearly anyone can encounter. As we know, accidents happen, and sometimes accidents can put us in the hospital and lead to a large medical bill. Other times, we may fall ill and need serious medical attention in order to recuperate from this illness. If you break your arm, either by playing sports, or in a car accident, or through some other means, you can easily rack up a medical bill in the high 5 figures if you lack insurance. The costs from the surgery, anesthesia, professional staff, and other items can quickly add up. Even if you have insurance, you may still incur a large bill just from the uncovered portion; or, you might be unlucky and require the assistance that isn’t covered by your insurance provider.
If you happen to fall into medical debt for whatever reason, you may be left scratching your head as to how you’ll climb out. In this post, we’re going to talk about the various ways that you can go about dealing with medical debt, and how this debt differs from other debts.
Medical Debt is Unsecured Debt
One of the key things to be aware of is the fact that your medical debt is “unsecured.” This just means that there is no collateral backing the debt; in this way, medical debt is similar to credit card debt. When you incur medical debt, the debt is for services rendered to you as a patient; since these services are simply consumed by you, there is nothing on which to collateralize the obligation. Even if a person were to offer up something to serve as collateral for their medical charges, hospitals and medical clinics simply don’t operate in that way. The fact that medical debt is unsecured is significant from a repayment or debt management perspective. This is because you as the debtor may have more leverage in negotiating with the hospital or clinical provider.
Negotiate a Settlement
One avenue you can take is to try to negotiate a settlement of the debt with the hospital or clinical provider. Hospitals are aware of how sizable their charges can be; they know that most people will have difficulty dealing with a medical bill in the high 5 figures or 6 figures. Furthermore, many hospitals operate under a principle of being willing to settle a medical debt quite readily. This has to do with the humanitarian purpose which underlies the healthcare industry.
This is one of the things which differentiates medical debt from other types of debt. Credit card companies, for instance, are in the business of making money; hospitals, on the other hand, are not nearly as much about maximizing profits, although profitability is still a concern, of course.
Work Out a Payment Plan
Another thing you might do is negotiate a payment plan with your hospital or clinical provider. This approach might be viable if you’re gainfully employed but not willing to part with a sizable lump sum at a single point in time. Your hospital or clinical provider creditor may be more willing than you would expect to work out such a plan, in part because of the reason we identified above. And, like a credit card company, the medical creditor knows that it stands to recover very little if you end up filing bankruptcy.
Discharge the Debt in Bankruptcy
Another option you have is to discharge your medical debt into bankruptcy. Depending on your circumstances, this might be the optimal solution for you. As mentioned, medical debt is unsecured, and so this means you won’t ever stand to lose something of value in exchange for wiping away the debt. You won’t have to forfeit something in order to discharge medical debt. In many cases, the decision to discharge in bankruptcy depends on the size of the medical debt. If you incur a balance of 6 figures, for instance, the option of bankruptcy becomes quite a bit more reasonable. Whatever you decide, you should remember that discharging medical debt in bankruptcy should never pose a moral dilemma. When you incur medical debt, this really stems from bad luck and randomness; bankruptcy basically prevents you from having this bad luck haunt you into the future.
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