Medical Debt, Credit Scores and Bankruptcy

The recent Supreme Court decision regarding the Affordable Health Care Act has renewed public discussion about how best to approach treating sky-high medical bills for those who cannot afford to pay. Whatever one's view regarding the best approach to this problem, one thing is clear: Medical bills are among the most prominently cited causes of bankruptcy filings in the U.S. and a large cause of consumer debt.

Medical Debt and Credit Scores

Insurance premiums can be high, even for those who have coverage, and many Americans are underinsured or uninsured. Still, when a medical condition strikes, the patient needs treatment. A patient is then faced with a difficult choice of how to pay for medical services.

Most medical providers will not extend credit. Unlike some other industries, most medical bills are due in full after the care is provided. Thus, many patients are forced to put their medical bills onto credit cards or simply have an outstanding balance.

Generally, medical providers will not report past-due debt to credit agencies, keeping a patient's credit score intact for a short time. However, after a certain number of collection attempts, the medical provider will turn the debt over to a bill collector - and the bill collection agency will almost certainly report the debt. So while a patient is provided some leeway for a few months, eventually the medical debt will be reported on the patient's credit score. Once a collection agency reports an outstanding debt, it is notoriously difficult to remove and will significantly lower a credit score.

Bankruptcy Can Help

A common myth of bankruptcy is that it is the end result of some individual's personal failure. However, much more frequently job loss, unforeseen medical bills and economic forces combine to create an unmanageable situation for a person who would otherwise be on sound financial footing.

Fortunately, like other unsecured debt, medical debt can be discharged through bankruptcy, freeing the bankruptcy filer from mounds of debt and interest and providing a fresh financial start.

While bankruptcy does lower a credit score, simply not paying outstanding bills lowers a credit score even more. In addition, with sound financial planning and freedom from debt, bankruptcy can allow a person to begin to establish good credit once again.

Nobody can predict when they will suffer a medical condition that requires extensive care and correspondingly high medical bills. However, the legal system allows people in this circumstance the freedom to file bankruptcy and receive a fresh financial start. If you are struggling to pay medical bills or other debt, contact an experienced bankruptcy attorney to discuss your legal options.