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How medical debt can affect credit scores
Even the most financially responsible person in Maryland can have difficulty keeping up with obligations when faced with mounting medical debt. According to Consumer Reports, 3 out of every 10 Americans has unpaid medical debt of $500 or more. This type of debt can have an adverse effect on credit scores and contribute to other financial difficulties.
The bright spot with medical debt is that it's treated differently than other forms of debt. Healthcare providers do not directly report it to credit reporting agencies. But if an outstanding balance remains unpaid, they often pass it along to a collection agency, and they may then report it. However, the three leading agencies do not officially report the debt to credit bureaus until 180 days of delinquency. Furthermore, a widely used credit reporting model does not consider balances under $100.
Patients with medical debt obligations are advised to be proactive as much as possible to minimize potential issues that could affect the ability to secure loans, buy a home, and obtain new credit. Such efforts could include reviewing a health insurance company's Explanation of Benefits to develop a better understanding of what portions of a bill are the responsibility of the patient. Individuals receiving medical care are also advised to regularly review monthly statements and request an itemized bill. In some instances, it may be possible for a patient to work out a mutually agreeable payment plan with a medical provider.
Congress to vote on student loan bankruptcy relief
Maryland residents who are struggling to make ends meet due to overwhelming student loan debt currently have few options, but their situations could soon change if a bill introduced recently in both the House of Representatives and U.S. Senate garners enough support to pass. The bicameral bill, which has been named the Student Borrower Bankruptcy Relief Act of 2019, would change the Bankruptcy Code by eliminating the provision that makes student loans non-dischargeable.
The bill faces an uphill battle and will need bipartisan support as it is opposed by trade groups such as the Consumer Bankers Association. A CBA representative said that the bill's passage would make matters worse for students and taxpayers because more student loans would be discharged and new loans would be more difficult to obtain and more expensive. However, the bill is not without supporters. The Center for Responsible Lending, the National Consumer Law Center, and Americans for Financial Reform have all come out in support of the legislation.
Bankruptcy may be easier to handle in time
If a Maryland resident filed for bankruptcy nine years ago, that bankruptcy will generally have little impact on his or her credit score or history. However, if that bankruptcy was filed just a year ago, it could have a significant impact on that person's credit score and history. It is important to note that individuals who file for bankruptcy may not experience negative consequences after doing so.
In some cases, a credit score can actually go up after seeking protection from creditors. This is because a person can have many debts discharged after doing so. Since these debts no longer appear on a credit report, a credit card company or other lender may see that person as creditworthy. Of course, the bankruptcy itself will remain on a credit report for up to 10 years. A Chapter 13 bankruptcy remains on a credit report for seven years.
Individuals should know that not all lenders will want to work with them right away. Furthermore, borrowers will likely be subject to higher interest rates and other less favorable terms until they prove themselves to be responsible again. It is possible for a person to completely rebuild his or her credit in about two years after debts are discharged.
Chapter 7 versus Chapter 13 bankruptcy: What's the difference?
When it comes to serious financial problems, it's a good idea to try to stay calm and explore all available options to get things back on track. The good news is that most financial crises are temporary. However, it's also true that a solution that works for one Maryland resident might not even be a viable option for another. No two financial situations are exactly the same.
It's important to know where to seek support if you're facing financial problems that you feel ill-equipped to handle on your own. Contrary to the stigma that often exists, bankruptcy is often a good choice to obtain immediate debt relief and lay the groundwork for a stronger financial future. Chapter 7 and Chapter 13 are the most common types. You must be eligible to apply, so it pays to learn as much as you can about each program to determine which one best fits your needs.
One bankruptcy is not like the other
Both Chapter 7 and Chapter 13 bankruptcy can help you get out of debt. Whether you have a credit card balance you can't pay, are unable to meet your mortgage obligations or have mounting medical bills because of an injury or illness, these programs may be able to help you resolve your financial problems. The following list shows specific differences between the two types and why you may qualify for one but not the other:
Debtors are protected by the FDCPA
The actions that debt collectors in Maryland can and cannot take are governed by the Fair Debt Collection Practices Act, or FDCPA. While debt collectors are allowed to contact individuals about a valid debt, those who are contacted have a right to verify what the debt collector is saying. If a person makes a request to verify a debt balance, verification must be provided in writing. Collection agencies are also generally barred from making contact before 8 a.m. or after 9 p.m.
Furthermore, they cannot contact an individual about a debt at their place of employment. If an individual requests that a debt collector put a stop to collection calls or letters, the entity attempting to collect a debt must comply. It is also a violation of the FDCPA to contact a family member other than a spouse or a friend about a debt.
According to the terms of the FDCPA, a debt collector cannot threaten or harass a person. For instance, a person cannot be told that a lawsuit is forthcoming if the entity collecting the debt has no intention of filing one. Harassment may include abusive language or making multiple phone calls on the same day. If debt collectors violate the law in any way, complaints can be made to a state's attorney general or the Consumer Financial Protection Bureau.
Out-of-network medical bills are worryingly common in Maryland
A recent study conducted by the Health Care Cost Institute reveals that one in five hospital patients in Maryland who received treatment at an in-network medical facility were sent an unexpected bill for out-of-network treatment or services. After analyzing almost 620,000 in-network admissions from hospitals in 37 states and the District of Columbia, only New Jersey, California, Kansas and Florida had a higher frequency of out-of-network charges.
The results of the HCCI study suggest that patients are frequently billed for out-of-network treatment despite taking steps to ensure that their doctors and hospitals are in-network and covered by their health insurance policies. The researchers behind the study say that this is because patients have no way of finding out whether or not the doctors who will be treating them and the laboratories that will be used for medical testing are in their networks.
When seniors run into credit card debt struggles
Seniors can face many financial pressures in their retirement years. This includes strains from:
- Medical costs
- Rising levels of everyday living expenses for retirees
- Providing financial support to their adult children
Some seniors turn to credit cards to help with such costs. It appears that this has become increasingly common here in the United States. Research points to credit card debt having gone up among elderly Americans in recent years.
Now, credit card debt carries some risks for seniors. If a balance gets high, covering it and the interest it generates can be difficult on a fixed income. Overwhelming debt can expose seniors to significant financial hardships, and could even end up greatly cutting into what they would like to leave to their family when they are gone.
So, when people encounter credit card debt troubles in their retirement years, responding promptly to the situation is critical.
There are various ways seniors may be able to stabilize their finances in the face of overwhelming credit card debt. In some instances, cutting unnecessary expenses and prioritizing payments can return things to a manageable state. Other times, negotiations with lenders may be able to secure improved terms to make paying the debt back easier. And in some situations, bankruptcy may be needed to properly resolve the debt. Among the things Chapter 7 bankruptcy can help with is eliminating credit card debt.
When is bankruptcy the most appropriate option?
You certainly know that bankruptcy is an option for debt relief, and you may have even considered taking this step to find some breathing room in your financial struggles. What has held you back? Was it the stigma of filing for bankruptcy? Was it the hit on your credit score? Perhaps you simply didn't understand what bankruptcy could do for you.
Filing for bankruptcy is not always the answer to overwhelming debt. In many circumstances, you may have other options, including negotiating with your creditors. Trying every legitimate alternative first is often a wise course of action before diving into bankruptcy. However, there are some times when uptcy is appropriate.
Evaluating your circumstances
Your first step in making any decision about dealing with your debt is to learn as much as you can about your options. For example, bankruptcy offers several forms. With Chapter 7, a court-appointed trustee liquidates some of your assets and pays your creditors as much as possible. Chapter 13 allows you to create a repayment plan for a certain period with payments that fit your budget. Whatever debt remains at the end of these bankruptcies may be discharged.
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