A medical debt turned over to a debt collections lawyer is a serious issue. Usually, many months or even years pass before the account reaches this point. The hospital or doctor's office tries to collect at first, with the account possibly languishing for a while before assignment to an attorney. Negotiations with the attorney are usually possible, but the attorney is not obligated to participate and could file a lawsuit for the entire amount.
Obstacles
Medical debt is unsecured debt -- the same as credit cards. No collateral is posted for the debt, leaving the filing of a debt lawsuit as the most powerful option for collecting. Illinois Legal Aid reports that people sued for unsecured debt are sure to lose in court if the lawyer filing the case is prepared with records showing the debt is valid and unpaid. There are no suitable court defenses for medical debt. Billing records will clearly show that the debt is yours, ruling out an identity theft challenge. The judge will not consider excuses such as unemployment, continued illness or divorce.
Chapter 7 Bankruptcy
Using the threat of filing for Chapter 7 bankruptcy is the best option for negotiating medical debt because it creates leverage -- even if you really do not intend to file. Chapter 7 is one of the simplest forms of bankruptcy and can completely eliminate medical debt in three or four months. A person with say, $75,000 in medical debt, theoretically could pay nothing in bankruptcy or legal fees and completely wipe out the debt. Chapter 7 allows a waiver of the $299 application fee, as of 2011, for people who cannot afford it, and they are allowed to file without the assistance of an attorney. Also, the American Bankruptcy Institute reports that some attorneys and organizations offer pro bono assistance, or free help, for people who need to file for bankruptcy but cannot afford an attorney.
Eligibility
Eligibility for Chapter 7 bankruptcy usually forces the attorney for the debt collector to negotiate. After all, the attorney knows he will receive nothing if you file for Chapter 7. However, not everyone is eligible for Chapter 7. Eligibility is determined by income, which varies by the state. Only those with low incomes qualify. However, that is sometimes the case for people who are out of work or unemployed for long stretches because of illness.
Chapter 13 Bankruptcy
People who cannot qualify for Chapter 7 are automatically eligible for Chapter 13. However, Chapter 13 requires a payment plan lasting three to five years. The courts allow reasonable expenses for living, along with monthly payments on secured debts such as a home mortgage. Money remaining enters the payment plan to pay medical debt and other unsecured accounts. Under the plan the medical debt attorney may collect the entire balance due, a percentage -- or none of it. It all depends on the amount of disposable income after after expenses.
Legal Advice
Hiring an attorney of your own is a smart move when negotiating medical debt. The best option is a consumer affairs attorney who also has experience in bankruptcy cases. The attorney for the debt collector will realize you are no pushover once your attorney calls. Your attorney can make a case for filing for Chapter 7 or Chapter 13 if a settlement isn't possible, and then negotiate a deal. You could handle the negotiations yourself, and that's fine if the medical bills total only say, several thousand dollars. However, more experience is usually necessary for negotiating really large medical debts. The attorney for the debt collector may have excellent negotiating skills and experience that are far superior to yours.
Settlement Offers
Settlement of medical debt is possible for around 50 percent of the balance, according to Bills.com. Consider negotiating only in writing if you choose to handle it yourself. Do not reveal information about income or assets while insisting you will consider filing for bankruptcy if a fair settlement isn't reached.
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