Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

Now, I'm no math expert; that's why I went to law school.  The other day, I heard someone mention that they were tired of the medical bills they were receiving and they were just going to pay those medical bills with credit cards.  Unbelievable.  You're of above level intelligence if you're reading this post because you can turn on your computer, log onto the internet and search for information about relevant subjects that interest you; right?  Then, what makes you think that using your credit card, with an interest rate of about 10% or more, to pay off a debt with 0% interest is a good idea?  Am I missing something here?

Too often people are led to the wrong conclusions about money and can't figure out how they got  themselves into the messes they created.  Stop and think about it.  It "feels" good to pay off a debt.  What's missing is that more debt is being created to "feel" good momentarily.  Don't let your emotions get the best of you when making financial decisions.

Another financial mistake would be to pay those medical bills with your retirement accounts; 401k, 403b, IRA, or Roth IRA account.  I don't care how you're saving for retirement, that money is not for medical bills now; it's for your future.  Never, and I emphasize NEVER, touch your retirement accounts until you retire.

Medical bills and credit card debts are always dischargeable in bankruptcy and your retirement accounts are safe from being taken by the trustee to pay those debts.  So, if the Courts can't touch your money to pay your bills, why should you?  

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From The Hospital to Bankruptcy Court is the title of a recent article in the New York Times that gets to the heart of why we need healthcare reform.  You could have a job that provides health insurance, but that health insurance policy has a cap on how much they will pay over the life of the policy.  Add to that limit, your deductible and co-payment amount of say 20% and you have a recipe for financial disaster and a prime bankruptcy case.

If you're faced with medical debt, do not use your credit cards or home equity or any other financing to pay that debt.  You're only adding interest to that debt and avoiding the most likely inevitable bankruptcy.  What's worse is that if you use home equity, you could lose your home later if you fall behind on your mortgage.  Taking action sooner, on deciding your options, could help you avoid a financial collision with bankruptcy court.

First, be sure you understand the limits on your health insurance plan and if you anticipate any large medical expenses, check to see if your employer offers a benefit plan where cash is taken from your paycheck, in pre-tax dollars, in advance to cover anticipated medical expenses.  What this does is essentially save you from paying income taxes on that money in advance, as opposed to deducting it on your income tax return later. If you've already paid for medical bills with your after tax money, then be sure to deduct it on your tax return.

Second, if you have medical bills that have gone to collections, you can make an effort to negotiate that debt.  Unfortunately, if the bills are completely out of your ability to pay, you need to consult with a bankruptcy lawyer who can help you file the right bankruptcy chapter for you and get that debt discharged.  Remember, you don't have to go broke to file for bankruptcy and you should consult a bankruptcy lawyer before playing debt roulette and using credit cards or savings to pay for medical bills because medical debt can be discharged in bankruptcy.

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