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How a forgotten medical bill could harm your credit

As we reported last month, medical debt is quickly becoming one of the top reasons Americans are filing for bankruptcy protection.

One of the main reasons for this is that health care costs are rising and insurance companies are often requiring higher deductibles and co-pays to offset their costs. As a result, spending on health care tripled for individuals between 1990 and 2012, the Centers for Medicare and Medicaid Services reported.

Additionally, most doctors in the past worked for small offices and were more willing to negotiate smaller bills with patients who didn’t have insurance or couldn’t afford to pay. Today, most doctors work for large professional groups and don’t deal with patients who can’t afford to pay.

However, even people who have health care coverage and can afford to pay their medical bills could be getting into trouble by opting to pay the debt late. As a recent article from The New York Times discussed, medical bills are more complicated than ever, and it often takes months to decipher exactly what is due.

When bills remain unpaid — for whatever the reason — it’s only a matter of time before they are sent to collection agencies, often without the patient’s knowledge. Once that happens, even small bills can wreak havoc on a person’s credit score.

As we all know, a poor credit score can prevent individuals from qualifying for mortgages, auto loans and credit cards. According to the director of the federal Consumer Financial Protection Bureau, one out of five Americans has medical debt affecting his or her credit report.

According to a mortgage initiator who was interviewed in the Times piece, a survey he conducted involving 5,000 mortgage applicants revealed that 40 percent of applicants had medical bills in collection and many of the individuals were unaware of the debt.

Medical debt isn’t just a problem for people who can’t afford to pay their bills. It can harm the credit of anyone who is confused by a medical bill or simply forgets to pay it. To find out more about repairing poor credit caused by medical debt, talk to an experienced bankruptcy attorney in your area.

Source: The New York Times, “When Health Costs Harm Your Credit,” Elisabeth Rosenthal, March 8, 2014

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