How to Consolidate Medical Bills

How Medical Debt Consolidation Helps Prevent Medical Bankruptcy

Sep 18, 2009 Asa Ghaffar

Are you looking for a way to settle medical bills or prevent medical bankruptcy? Find out the different ways to consolidate medical bills.

Choosing to consolidate medical bills simplifies finances, reduces repayments and puts an end to medical debt collection activity. Whilst this can be achieved through medical bankruptcy, it isn't always the most best debt solution.

A study by Harvard Medical School shows that as many as 62.1% of all bankruptcies had a medical cause. It is possible to reduce this figure by making Americans more aware of the various options available to them.

Why Consolidate Medical Bills?

Filing for chapter 7 bankruptcy shows on credit reports for a period of 10 years and can make it more difficult to get credit.
Those who have filed under chapter 7 in the previous 8 years cannot do so again. It may be possible under chapter 13, but this will involve a monthly payment for a 3 or 5 year period.
Although there are over a million bankruptcies every year in America, the matter is still made public.
The satisfaction of knowing that creditors have been fully or partially repaid.

Consolidate Medical Bills with a Loan

A debt consolidation loan can be used to settle medical bills. Instead of paying multiple creditors, a single payment will be made each month until the debt is cleared.

Whether an unsecured loan is the right option will depend on the applicant's credit score. The reason this is so important is because a low FICO score will means that the cost of borrowing is more expensive. Those who have a poor credit history may be able to get an unsecured Prosper loan for up to $25,000.

Should more than $25,000 be needed, a homeowner loan may be the only viable option. The provision of collateral means that a larger sum of money can be borrowed at a more favorable rate of interest. Think carefully before securing debt on the family home.

Settle Medical Debt with a Debt Solution

It is possible to consolidate medical bills with a Debt Management Plan or debt settlement program. Whilst these are normally preferable for individuals with poor credit, the option chosen will also depend heavily on the amount owed.

Debt Management Plans are normally the preferred option for those who owe a more modest sum of money. After a budgetary analysis, it will be determined how much should be offered to creditors each month. Whilst none of the debt is written-off, most creditors will freeze interest and further charges.

Following a negotiation process, a debt settlement plan can write-off up to 50% of the principal (the amount owed). The remaining sum is repaid over a 12 to 36 month period. Both debt relief plans impose a management charge of about 15%.

There are a number of ways other than medical bankruptcy to prevent medical debt collection. Before deciding to consolidate medical debt, it is sensible to consult a non-profit credit counseling service. This is a completely free service that will help the debtor to decide upon the best debt solution.

Sources

Himmelstein, David. (June 5, 2009). "Medical Bankruptcy in the United States, 2007: Results of a National Study." The American Journal of Medicine.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional before proceeding.

The copyright of the article How to Consolidate Medical Bills in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish How to Consolidate Medical Bills in print or online must be granted by the author in writing.