Medical debts are unsecured debts and are treated as other unsecured debts, such as credit cards. Medical debts, especially for the uninsured can be extremely large, and can lead to extreme financial difficulties. The Fair Debt Collection Practices Act governs the behavior of debt collectors as they try to recover medical debts.
Bankruptcy
Federal law allows you to address medical debt through bankruptcy. Chapter 7 bankruptcy allows you to eliminate medical debt and other unsecured debt just a few months after filing the paperwork. Chapter 13 bankruptcy, which usually attracts people with higher incomes and real estate to protect, allows you to set up a five-year repayment plan, with the bankruptcy trustee deciding how much you can afford to pay each month on your medical debts and other debts. After the five-year period, the remainder of your medical debt and other unsecured debt is discharged. According to the website BCS Alliance, more than 50 percent of all personal bankruptcies in 2003 and 2004 were filed because of medical debt.
Lawsuits
Medical debt collectors can pursue you in court. According to BCS Alliance, some of the debt collectors will sue for debts for as small as $100, although that is unusual. You could face bank or wage garnishment if a medical debt collector wins a judgment against you in court.
Settlement
Most medical debt collectors would rather work something out than take you to court. Repayment plans are almost always an option, and sometimes debt collectors will settle for less than the full amount owed if you can pay in a lump sum.
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