One in every five Americans struggles with medical debt. The good news is that there may be help available. Before you pay medical bills with a credit card, consider negotiating with your healthcare providers – there are often opportunities to reduce what you owe.
You should also be aware that virtually all medical debt can be handled in bankruptcy, either through Chapter 7 (liquidation) or Chapter 13 (repayment plan).
Seriously, don’t put medical debt on a credit card. Clinics and hospitals typically charge low interest rates. Paying your bill with a credit card means much higher interest and a greater chance of collection if you default.
In addition, medical debt is treated differently than other types of debt when it comes to your credit report. It is weighted differently, for one thing. And, federal law prohibits the credit reporting bureaus from even including medical debt on your report unless it has been past-due for six months. If you put your medical debt on a credit card, you won’t have those advantages.
You can and should prioritize paying off debts for your home and car, as these are crucial to living and continuing to work.
A few steps to take to negotiate down medical debt
The first thing to do is to ask the clinic or hospital to help you. They have an interest in seeing your debt repaid, and they may have solutions available. Ask for income-based repayment or financial assistance. Nonprofit hospitals are required to have financial assistance policies.
Be aware that you could be being charged a premium rate. Once you have exhausted your insurance, if any, many healthcare providers charge you the “chargemaster rate.” This is usually a lot higher than what an insurance company would pay. The fact that you are being billed the chargemaster rate could change if you can persuade the provider to give you a lower price.
Keep at them. The art of negotiation often boils down to a simple refusal to give up. If the healthcare provider has a reasonable argument for why you can pay what they’re asking, you need to make a counterargument. Be aware that negotiations with healthcare providers can take months – or even years. Keep trying until you get a deal you can afford.
Hire a lawyer. Many lawyers who handle bankruptcy also negotiate with creditors. However, your lawyer may advise you to declare bankruptcy instead of continuing to struggle with significant medical debt. That said, the fact that you are considering bankruptcy may prove to be a strong bargaining chip.