unsecured debt
How to handle medical debt
There are many forms of unsecured debt, including credit cards, personal loans and essentially, any debt that is not secured by an actual asset or collateral. However, the one form of unsecured debt that does not get much treatment or conversation is medical bills.
Incurring significant medical bills could happen to you as a consumer at anytime. If you are injured or become sick and require a trip to the emergency room or surgical room, it could result in thousands of dollars in medical bills. Even with health care insurance, you may end up with appalling debt due to your medical situation. To make matters worse, many health care providers have unfair billing practices that only add to the financial issues you may confront. The problem is that many patients simply do not think about this and what happens if the insurance declines to pay, or there is a large co-payment required.
Medical Bills are viewed in the same way as Credit card debt, it is unsecured. However, if you don’t pay your bills you can be sued for the balance. Health care providers can send medical debts to collections, file judgments, garnish wages, obtain home liens, and even take you to court over medical bills that you can’t afford to pay.
Let’s take a quick look at exactly how medical insurance Works. Typically, you have an insurance policy that will require you to pay the first part of a bill, say $25 – $500. The heath care insurance picks up the balance, so long as the treatment is determined to be medically necessary. In some case, after you are admitted to a hospital, a doctor must determine if it is medically necessary for you to stay. Each day a decision is made for the following day. If you are able to transition on, and you want to stay, then a Nurse Case Manager will discuss your situation with the insurance company, and if the insurance company decides they will not pay, the financial burden shifts to you as the patient.
If the insurer decides they will not pay, you do have many options. First, you should look into the decision and in many states just as there are consumer protection laws, there are mirror laws specific to the regulation of insurance and fraudulent and deceptive denials of coverage. For example, in Massachusetts, M.G.L. 176(D).
If it is determined that the denial was proper, or you simply did not have coverage, you may want to consider the following solutions to the medical debt:
- Evaluate all the insurance, Medicaid, and charity options available to you.
- It’s is very common to find double billings and errors on health care invoices. Take the time to closely review each of your bills and challenge any costs that you feel are incorrect.
- File a Bankruptcy to discharge your obligation to pay back all unsecured debt.
- Pay the bill with third party funds or a credit card. The problem is that you are going to incur interest on the debt higher then the bill itself.
- Negotiate with the Creditor and enter into a payment plan
- Settle the Debt with the creditor for less then full amount, and then negotiate a release of liability
The bottom line is that even if you have a massive medical bill, do not panic, there are solutions and opportunities out there for you. Your first step is to get all the facts, and then speak to a consumer debt advocate who may be able to direct appropriately.
Foreclosure or Bankruptcy – Which Is the Lesser of Two Evils?
In the past, “bankruptcy” and “foreclosure” were dirty words. But in today’s economy, they’re realistic solutions to financial black holes brought on by job joss, medical catastrophe, or predatory mortgage lenders and credit card companies. If you’re a homeowner struggling with financial disasters, you probably know that you need to decide whether a foreclosure or a bankruptcy is the lesser of two financial evils.
If you choose bankruptcy, you may be able to eliminate credit card debt, medical bills, court-ordered judgments, and even debts for overdue utilities. With a discharge of these overwhelming debts, you can often keep up with the mortgage, thus saving the family home.
In contrast, choosing foreclosure means you’ll lose the house… but the house may not be worth saving if its value is less than the remaining mortgage. Homeowners who’ve worked with us have chosen to rent, or sometimes they own investment properties that they can move into, such as a multi-family house.
But neither bankruptcy nor foreclosure is an easy, one-size-fits-all, solution. For example, a bankruptcy stays on your credit report for 10 years, while a foreclosure is there for 8 years. Because a foreclosure drops off a credit report 2 years earlier than a bankruptcy, many homeowners believe it’s a “better” solution. But many reputable credit counselors report that a foreclosure has twice the negative impact on a credit score as a bankruptcy. It’s extremely difficult to get a new mortgage after losing a property to foreclosure. And some individuals who’ve gone through foreclosure report that they haven’t qualified for apartments they wanted, even though they’re able to afford the rent after the mortgage is gone.
On the other hand, we’ve seen that individuals who’ve gone through bankruptcies are better candidates for future financing, and often receive it earlier than individuals who’ve gone through foreclosures. The reason is simple: bankruptcy erases debt. After a bankruptcy, you don’t owe anything to anyone. Your income is yours again. And creditors also know that you can’t file for bankruptcy for another 8 years, so you can’t walk away from any new debt that you incur.
In some cases, a homeowner may be so far behind on the mortgage that a foreclosure is inevitable. There are two typical solutions. First, the homeowner could file for bankruptcy right before the foreclosure. If the mortgage lender sells the property for less than the mortgage owed, the difference between the foreclosure price and the mortgage (which the homeowner would ordinarily have repay to the lender) is discharged through the bankruptcy. Second, mortgage lenders know very well that homeowners can discharge this difference in bankruptcy instead of paying it back. So they’ll often wait to foreclose, which gives the homeowner an option to do a short sale (to be discussed in an upcoming blog).
In short, if you’re a homeowner struggling with debt, you have a lot of options. If you’re facing a financial crisis that may end in either foreclosure or bankruptcy, talk to an experienced attorney who can help you determine your best option. The right decision can save you years of financial trouble.
Understanding the new credit card laws
Credit cards, if used properly, can be useful and convenient tool, and can even help build a strong credit score that will assist you with future borrowing. However, owning a credit card makes it easy to spend money you don’t have and when the interest is taken into account, consumers can build massive debt. According to The Nilson Report, April 2009, In the average American owed $10,637 in credit card debt. The U.S. Census Bureau reported that credit card debt is growing and predicted that about 181 million Americans would owe credit card debt by 2010. That figure is up from 163 million Americans in 2008. As a nation we have become a plastic society, using our credit cards instead of actual money in our pockets.
The Credit card companies understand the temptation that has been provided to their clients and in the past have made it extremely easy for consumers to obtain credit cards. Recently, these same credit card companies have significantly increased interest rates, decreased spending limits and targeted young consumers with little experience managing their own finances. In order to combat this practice, the Federal Government has recently passed the Credit Card Accountability, Responsibility and Disclosure Act which will take effect in February 2010.
There are many sweeping changes to the way credit card companies conduct business. the following are some of the key changes including restrictions on raising interest rates permanently on borrowers who are delinquent 60 or more days. If the Consumer pays on time for 6 straight months, the credit card interest rate must be reinstated to the original lower rate.
The new law also requires that the advertised low interest rates must have a minimum 6 month period of time and prohibits increased rates in the first year a cardholder has a new account. This is important because it limits the Consumer’s liability on initial purchases.
The law also addresses late fees and penalties for paying your bill by phone, mail, or online and makes it unlawful to access additional fees to accept payments in this way. In the past, if a consumer wanted to pay at the last minute by phone, they would have to pay an extra fee, which is not lawful any longer.
Finally, the law also includes several measures aimed at protecting young consumers and college students, who until now have been blindsided with offers of easy credit. The law requires that consumers under the age of 21 will now be required to have co-signers, such as parents or other adults over the age of 21, who will take on joint liability for any card debts that are incurred. This will essentially end the marketing campaigns on college campuses. “Young people thrown on college campuses can be extremely vulnerable to these practices,” says Brad Lazarus, principal at Omega Advisors, a Chicago financial planning firm. Some credit card companies offer students nominal gifts, free food or free T-shirts just for applying. But the Credit Card Accountability, Responsibility and Disclosure Act makes this practice unlawful at application sites on or near college campuses. As an additional protection of the most vulnerable consumers under the new law, credit reporting agencies can’t provide the credit reports of under-21 year old consumers to credit card companies unless the consumer specifically requests that they do so.
