If you simply can’t afford to pay, it may be time to file bankruptcy to get a fresh start.
Question: We have approximately $40k in debt due to a medical condition that caused us to go broke, lose our income and have no ability to pay. Is there any type of hardship clause to help our situation? Or anything we can do to get back on track? – Amy B in Connecticut
Steve Rhode, the Get Out of Debt Guy, responds…
Having a financial hardship following a tragedy and unaffordable medical bills is more common than you would expect.
There is a “hardship clause” that will let you regroup and get a fresh start. In fact, it is the only debt relief option that will eliminate your debt in about nine-days and cost around $1,500 in fees. It’s a Chapter 7 bankruptcy.
If the problems are now behind you and you have income coming in soon, then it is time to deal with the past financial misfortune and get yourself ready for a better financial future.
So many people misunderstand bankruptcy. In horrible financial times, it is not something to fear or be afraid of. It is a legal right you have access to. It is the fastest way out of problem debt for the least cost.
I think you should read, So You Are Going to File Bankruptcy. That’s Good News. Congratulations.
Things can and will get better fast as soon as you close the door on the unfortunate financial past and focus on making tomorrow better.
Whether you need to file for personal bankruptcy or commercial bankruptcy for your business, Debt.com can help you get the fresh start you need.
How long does it take a medical bill to go to collections?
With debts like credit cards, the account only goes to collections after six to nine months of nonpayment. But that’s not the case with medical bills. Service providers often send unpaid bills to their collection department or a third-party collector quickly. In fact, even if you set up a payment plan, if you miss that payment by a few days the medical provider may send your account to collections.
Understanding the credit effects of medical collections
The good news is that the three credit bureaus – Experian, Equifax, and TransUnion – agreed to adjust their rules on medical collections. In 2016, they rolled out the National Consumer Assistance Plan to help protect consumers against unfair credit reporting trends. This included adjusting the rules on medical collections.
Under the new system, medical debt collectors can’t report to the credit bureaus until 180 days after an account becomes delinquent. The law is designed to help consumers avoid collections on medical bills that insurance is supposed to pay. However, it also gives someone who can’t pay six months to make arrangements before the account will appear on your credit report.
The second bit of good news is that even if a medical collections account does get reported, it won’t affect your credit score as badly in newer credit scoring models. Both FICO 9 and VantageScore 4.0 separate medical collections from other types of collections when calculating your credit score. Medical collections have less “weight,” meaning that they don’t negatively affect your score as badly as a credit card debt collection account would.
That’s not to say that you can just ignore medical bills and not worry about collections. However, it will have less of an impact on your credit while you decide how to deal with the debt. And even if you decide to declare bankruptcy to eliminate your medical debt, it may not affect your credit as badly as you may think.
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Published by Debt.com, LLC