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Negotiating Medical Debt

The United States is the only western, industrialized country who does not offer universal health care (the new healthcare laws do not go in to effect completely until 2014).   At any given time, about 20 million Americans cannot pay their medical bills.  While many of these people are able to repay the debt by taking out a loan, borrowing from family and friends, or taking a cash advance on a credit card, others are not so lucky.  Those who do not have medical insurance or cannot pay back medical debt often are forced to file bankruptcy in order to protect their assets or get sued by very aggressive collectors over trivial amounts.  About 40 percent of all personal bankruptcy files are due to medical debt and that percentage increases to 48% for those 65 and older. About one million Americans file bankruptcy every year because they cannot pay their medical bills.  Other groups disproportionately bankrupted by medical debt include single women raising children on low wages. 

Ironically, a significant percentage of people are plunged into bankruptcy with relatively little debt.  Many file for the simple reason that the medical industry collection industry is so inflexible and will not work out reasonable payment plans for those who can not pay the debt off quickly.  Instead, collection agencies rush to the courthouse to file small claim lawsuits (those less than $5,000).  In fact, many small claims courts are clogged with such suits, with medical debt lawsuits making up a large proportion of the docket.  Moreover, this trend is only going to increase as many hospitals, doctors and other medical-related businesses turn their delinquent accounts over to collection agencies in 30 or 60 days rather than waiting the traditional 150 days before doing so. 

Another trend is for medical-related businesses to sue in small claims court for very trivial amounts, say $100, rather than just write the debt off as a bad debt.  Medical collectors are accustomed to suing and obtaining easy default judgments because so many debtors don't bother to fight back.  Instead of letting this happen to you, consider the following options.
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Debt Negotiation -- Table of Contents
Your options for dealing with medical debt are as follows:

Option 1:  Negotiate with the hospital, clinic, doctor, etc., for an affordable repayment plan.  This might not be easy as the medical industry collection can be inflexible and aggressive.  Do not let them intimidate you into paying more than you can afford each month.  Specifically, do not let them scare you into taking out a home equity loan or second mortgage in order to pay the debt, particularly if you are on the verge of financial disaster.  Do not repay medical debt by taking out large cash advances on your credit card.  If you do this, you might disqualify yourself from qualifying for Medicaid in the future.

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