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Wednesday, August 26, 2009

Learn your options when dealing with medical debt

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the expert

Dear Credit Guy,
I am having a lot of financial problems due to medical conditions. I can't pay my credit card companies and have called to let them know of my situation. They have people calling four to five times a day. I want to pay my obligations, but am unable to now. What other recourse do I have besides debt management as suggested by one company? -- Sandra

Answer for the expert

Dear Sandra,
I am sorry to hear you are dealing with a medical condition. I hope you will be back to good health very soon. The fact that you are ill is stressful enough, but unfortunately, you also have to deal with financial stress. It sounds as if you have attempted to communicate with your creditors to let them know of your medical condition, and that it has affected your ability to make your payments. After communicating with them, ask that they postpone their collection efforts for 90 days. Most creditors have the ability to delay their collection efforts for a certain period of time. At this point, you have told them you are not able to pay and any further communication is only adding to your stress level and is not accomplishing anything.

Next, I would determine exactly what you are able to pay, and what you are unable to pay due to your disruption in income. Also, determine as best you can, when and if you will once again be earning what you did before your medical condition. If you are unable to pay your unsecured credit card obligations, that is one thing, but if you are also late with your mortgage or rent or car loan payments, then you need to take immediate action.

Communicate with your mortgage lender and car loan lender right away to let them know your current situation. Ask if your lender has a deferment program that lets you skip payments for a specified length of time without penalty. Keep in mind that a deferment plan will only work if you believe you will have the income to once again start making payments at the end of the deferment period. The key is to communicate with your lenders as soon as possible if you are already behind or believe you will not be able to make this month's payment and request assistance.

Some credit card issuers have forbearance programs that let you put off payments for a period. If your debts include the costs of your medical treatment, hospitals, too, have programs that let you stretch out or reduce payments. Investigate your options for paying medical debt.

Should your lender(s) be unwilling to assist or if you would rather have assistance in communicating with your lenders, get in touch with an accredited credit counseling organization at the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. Your certified counselor will review your current financial situation and make recommendations for how best to proceed. The counselor will have the expertise to communicate with your mortgage lender and other creditors should that be required and desired by you. In addition, collection calls should stop or at least slow down.

My hope is that you are current and able to make payments with your secured obligations such as your mortgage and car loan, and are only behind on your unsecured credit card obligations. If that is the case, then you have done all that you can do at the moment. You are unable to make payments due to your medical condition and you have let the creditors know the situation.

When and if your income is restored to its original levels, you will need to communicate with your credit card issuers or their collectors and make arrangements to pay what you owe. Should you receive a summons to appear in court from one of your credit card issuers, make sure you appear in court. Bring documentation of your medical condition and explain to the court why you have been unable to pay.

Your credit score will, of course, have suffered during this trying time. However, just as you will hopefully heal with time, your credit will improve with time as well once you have had the chance to pay what you owe or bring all your accounts current (paid all past due amounts).

Take care of your credit!

See related: Know your rights: Fair Debt Collection Practices Act, 15 tips for paying medical debt, Debt collection sample letters, 11 tips for dealing with debt collection, collectors

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