Medical Debt, Collectors & Credit

Your submission contains several questions, so I am going to break it into three parts:

1. Options for paying medical debt
2. Dealing with collection calls
3. Credit issues.

1) Some Options for Paying Medical Bills

Even if your bill has been sent to a collector, some doctors and hospitals will be willing to pull the account back from the collection agency if you present them with the facts of you situation and demonstrate a good-faith attempt to payoff your debt. Oftentimes they will even be willing to negotiate a reduced amount when provided proof of hardship, such as disability.

If your debt is with a private doctor, contact him/her directly. If your debt is with a hospital, contact the hospital's administrative office and ask to speak to the financial counselor/financial assistance office. Most hospitals have a department or person where you can meet with someone face-to-face or over the telephone to discuss a situation like this.

Millions of people every year find themselves in similar situations and given that you are on disability, you may find the medical provider is reasonable and willing to negotiate. Keep in mind that doctors and their financial assistance personnel usually have a certain degree of latitude in evaluating hardship cases, so engaging them in a polite and courteous manner may help you as you negotiate your case.

Here’s a quick overview of my advice on negotiating payment options with any creditor (in your case, your doctor and/or hospital):

Be polite. This will get you further than anything else when negotiating with a creditor. After all, collection agents are humans too. They spend most of their time dealing with angry and difficult customers, so you may find that by being courteous the creditor will be more likely to give you what you want. Like my grandmother used to say "You'll catch more flies with honey than vinegar."

Be specific. Always let the creditor know that your goal is to settle your debt to the best of your ability. Also mention that you hope to clean up your credit and that you would like to have them remove their negative item from your credit report as part of your payment agreement. They don't have to grant your request, but if you don't ask, the answer is always no.

Be flexible. Let the creditor know that you are willing to accept a reasonable compromise. Creditors need to meet their objectives, too. If you present a "win-win" situation, then the creditor can feel good about the negotiation.

Be realistic. Some creditors will refuse to negotiate. Don't take it personally and try again at a later date.

Be persistent. The credit repair process takes time and effort. And as with many things in life, hard work and persistence will help improve your chances of success.

Get It In Writing. It's important, when resolving a debt, to always get the agreement in writing before sending your money, and to have them also send a letter confirming that the account is resolved and at a zero balance once they receive your final payment. This is the proof you'll need in cases where a creditor fails to properly report your payment to the credit bureaus or tries to make additional claims on the account in the future. You can ask them to send the agreement letter by mail or fax (or in person, if the creditor is local), which most will be happy to do to ensure your payment. Make sure their offer letter is on the creditor's letterhead & signed. Also, while negotiating with creditors, it never hurts to ask for the negative item to be deleted from your credit report in return for payment.

When having problems regarding medical bills, the American Academy of Family Physicians also recommends the following:

• Notify the appropriate offices quickly.
• Keep in touch with your creditors.
• Record the names and phone numbers of the people you are dealing with.
• Document the date, time, and results of your phone calls and meetings.
• Pay something - even a small amount - on each bill each month as a gesture of good faith.

I would also encourage you to download our free Budget Personal Finance Budget Guide available at /guide/. It may help you plan your money management as you navigate the road ahead.

If you find that your doctor or hospital is unwilling to negotiate, there are still other options available:

A debt consolidation loan is the first option that comes to mind for many consumes who find themselves struggling with debt. There are basically two types of consolidation loans available to consumers in your situation: secured and unsecured. A secured consolidation loan is basically a home equity loan which would tap into your home equity to repay your unsecured creditors. This type of loan does not reduce the balance of your debt, but it generally lowers the interest rate and monthly payments. The downside of a secured debt consolidation loan is that it will convert what was previously unsecured debts into debt secured by your home. This means that if you are unable to make your monthly payments, the lender could foreclose on your home. However, secured debt consolidation loans work for many people, so if you own a home this is an option you may want to explore.

An unsecured consolidation loan is essentially a personal loan used to repay other creditors. Since this type of loan is unsecured, the interest rates are usually higher than those on secured consolidation loans. Also, if your credit is less than perfect you may have difficulty finding an unsecured consolidation loan that will actually improve your financial situation, because the interest rate on the loan will be based primarily on your credit score.

For more information about debt consolidation loans, I encourage you to visit the Debt Consolidation Loan Resources page.

If you find that a debt consolidation loan will not improve your financial situation, you may want to consider alternatives such as Consumer Credit Counseling and Debt Settlement. In a consumer credit counseling program, or CCCS, the credit counselor would arrange a lower interest on your credit cards. You would then make one monthly payment to the CCCS firm, which would distribute that money to your creditors. While CCCS firms can help some people reign in their debts, many find that these programs do not sufficiently lower their monthly payments to improve their overall financial outlook.

Another alternative is Debt Settlement. Companies that offer debt settlement services negotiate with your creditors to reduce the balances on your credit cards, not just the interest rates. Often, debt settlement firms are able to reduce consumer's debts to as little as 40% to 50% of the balance. These programs can also significantly reduce the amount you pay monthly toward your debts. However, the downside is that these programs have a negative impact on your credit score while in the program and for a couple of years afterward. Many consumers find this credit impact well worth the benefit of settling with their creditors.

If you are interested in debt settlement or CCCS, I encourage you to visit the Bills.com Debt Help Resources page. Again, enter your contact information into the Bills.com Savings Center, and we will have pre-screened providers contact you to discuss the options available to you.

Finally, you could look into filing Chapter 7 bankruptcy. Because I do not know all of the details of your financial situation, I cannot say for sure that you will be able to file bankruptcy, but given your relatively low income, I think it may be an option. If you would like to learn more about bankruptcy, you should visit the Bills.com Bankruptcy Information page.

2) Now, as for the collection calls

The Fair Debt Collection Practices Act, requires that debt collectors and attorneys stop calling you at home and at work once you ask them to stop. The law specifies that your request must be in writing, therefore, you should tell them to stop calling you at home and at work the next time they call, but then follow it up with a certified letter, return receipt requested. Shown below is a sample letter template:

Sending this type of notice does not resolve the debt. For example, the creditor may file a lawsuit against you in order to collect the debt, even if you prohibit further contact by the collection agency. The Fair Debt Collection Practices Act does not apply to original creditors, like the actual doctor or hospital that you owe; it only applies to debt collection agencies and attorneys collecting debt. Therefore, do not quote the FDCPA to get original creditors to stop calling. Instead, quote state law that governs original creditors but usually has similar provisions to the federal legislation.

3) Your Credit

Under the Fair Credit Reporting Act, the three reporting agencies must update and keep accurate data in their credit files. So long as the information contained in your credit report is accurate and timely, then time is the only thing that will remove it these medical debts from your report.

If there is information that you do believe is inaccurate, you should notify the credit reporting agencies (typically through a certified letter) and then wait one reporting cycle (90 days) for the errors to be removed.

The Federal Trade Commission has a terrific Web site covering credit reports, including how to address inaccuracies.

If you would like more information regarding credit, please visit the Bills.com credit resource page.

I wish you the best of luck in resolving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com