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Medical debt consequences

Many people in New Hampshire find themselves in a situation in which an unexpected illness or medical emergency results in a mountain of medical bills. Even those who have insurance may find themselves suddenly overwhelmed by unexpected medical debt.

Medical debt can be financially devastating for many people. In order to attempt to keep up with staggering medical bills, some find themselves in the position of choosing between medical care and utilities, house payments and even food. Others end up canceling doctor's appointments, forgoing needed prescriptions and missing out on needed follow-up care.

Medical debt can be turned over to collection agencies and reported to credit bureuas. The resulting lower credit scores can then lead to difficulty with getting approved for loans, mortgages and even some jobs. Additionally, an inability to pay medical debt can lead to civil lawsuits, judgments and garnishments or bank levies. Medical debt is such a problem that 62 percent of bankruptcies filed are filed as a result of these types of obligations. Of those whose bankruptcy was caused by medical debt, most had health insurance when the debt was incurred, and most are educated, middle-class individuals who are also homeowners.

When people have unmanageable debt, it sometimes makes sense to file bankruptcy in order to get some debt relief. A bankruptcy filing will halt all collection activity, and after debt is discharged, the creditors may not engage in any further attempts to collect on the obligation. Those who have medical debt discharged in bankruptcy can halt garnishments, lawsuits and other problems, effectively starting with a clean slate. In order to help prevent being surprised by a health problem that results in significant medical debt, it is a good idea for people to try to have savings set aside in the event an unexpected emergency occurs.

Source: The Henry J. Kaiser Family Foundation, "Medical Debt among People with Health Insurance", Karen Pollitz, Cynthia Cox, Kevin Lucia and Katie , November 23, 2014

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