Due to medical expenses relating to an emergency room visit not covered by my health insurance, I exhausted my savings and still have debts I cannot afford to pay. My debts are in the form of credit cards, unpaid medical bills, as well as some miscellaneous bills. As you can imagine my credit is poor and I am struggling. Can you recommend a bill consolidation program to help me get back on my feet again?
Thanks for your question about bill consolidation programs for people suffering financial hardship.
One of the most frustrating parts of being in debt is trying to figure out all of your different payments. It seems like just when you're on top of your finances, another bill arrives in the mail and throws you off kilter again. For people trying to pay down their debt, medical expenses and other emergency bills are a significant cause of financial hardship. According to a report published by Urban Institute from 2017,
"Nearly one-quarter (23.8 percent) of nonelderly adults reported past-due medical debt in 2015, with the highest prevalence found in the South
There are various bill consolidation programs. For example, if your credit score is good to excellent, but you ran up a lot of credit card and medical expenses, consider taking out a low-interest rate bill consolidation loan, which combines different debts into one affordable monthly payments. A debt consolidation loan allows you to pay off your debt quicker and cheaper.
However, if you are struggling with debt and various bills, then most likely your credit is hurt, and you are looking for a way to lower your monthly payments. Fortunately, several bill consolidation programs address varying degrees of hardship, from mild to very hard, are credit counseling (and a debt management program), debt settlement, and bankruptcy.
If you are suffering a mild hardship, then a Credit counseling and debt management program (DMP) offer you the chance to consolidate all of your credit card bills into one monthly payment. Credit counseling helps you to set a household budget and understand your financial capabilities. If appropriate, you can enroll in a debt management plan with creditors to set up interest rate concessions and fee waivers to pay-off the entire enrolled debt balances over 60 payments.
Debt settlement is a bill consolidation program for households suffering a major hardship. Just as you mention, medical bills are a common source of financial stress. In a debt settlement program, you stop making your monthly payments on your enrolled accounts. Instead, you make one monthly payment to a designated account. As the balance in this account grows in size, the debt settlement program provider negotiates with your creditors. Over time, the debt settlement program provider will negotiate settlements for a fraction of the original balance due. The amount of the debt reduction depends on the size of the balance, the creditors' policies, and other circumstances.
|Debt Settlement||Credit Counseling
Debt Management Plan
|Repay Full Balance||No||Yes|
|Credit Score Impact||Moderate - Severe||Low - Moderate|
|Creditor Collection Calls||Yes||No|
|Possibility of Litigation||Yes||No|
|Close Enrolled Accounts||Yes||Depends|
|Typical Program Length||24-36 months||60 months|
|Monthly Payment||Moderate||High (3% of enrolled debt balances)|
Here is a table comparing two bill consolidation programs:
Bankruptcy is intended to help people in severe hardship. While Chapter 7 bankruptcy wipes out all of your debt, it is tough to qualify. However, a court-approved Chapter 13 bankruptcy creates one payment for your unsecured debt, usually over a five year period. Your monthly payment amount will be based on your monthly disposable income as defined by the bankruptcy code. After you have made payments to your creditors for five years, any remaining unsecured debts will be discharged. Chapter 13 is commonly used by debtors whose assets exceed the exemptions offered by state law.
Try using bills.com Debt Navigator, an innovative free tool to help you analyze our situation and provide real debt consolidation solutions.