Medical debt is the top reason why people file for bankruptcy according to a Nerdwallet report. Data from Consumer Reports found that 30 percent of those who had insurance had unpaid medical bills. While such debt can be a financial nuisance for Virginia residents, failure to pay may not have a negative impact on a person’s credit score. However, this depends on the type of scoring system a lender uses.
Furthermore, once a debt goes to collections, it can remain there for up to seven years. If an individual accrues a medical debt, credit agencies have to wait at least 180 days before listing it on a credit report. This may make it easier for an individual to pay the debt or at least determine how much he or she owes. It may also provide enough time for an insurance company to make a timely payment to a medical provider.
In some cases, a medical debt may be incorrectly attributed to an individual. Therefore, it is important to dispute any charges that are made in error. This can be a good idea whether the insurance company or the credit agency has made the mistake. It is important to note that negative information about medical bills is supposed to be removed if an insurance company later pays the amount owed.
Filing for Chapter 13 bankruptcy might be an effective way to find relief from overwhelming debt such as medical bills incurred. Individuals may be able to reorganize secured and unsecured debt balances and repay them over a period of three or five years. After the repayment period ends, debt balances that remain may be discharged. Other benefits might include an automatic stay of creditor contact and leverage with secured creditors as it relates to renegotiating loan terms.