If you’re finding yourself drowning in medical debt that you just can’t pay then you may be concerned not just for your health but your financial future as well. What are the repercussions for unpaid medical debt? Can they take your house for medical bills? Can they take your car or savings?
Depending on the level of coverage you get from your medical insurance you might find that a health crisis becomes a financial crisis as well. According to the Kaiser Family Foundation more than a quarter of U.S. adults have a difficult time protecting their assets, like their home, from medical bills. Medical debt is the number one reason that people file for bankruptcy in America today.
So can you lose your house over medical bills? The short answer is yes, it is possible to lose your home over unpaid medical bills though the doctor or hospital would have to be willing to go to a lot of effort to make that happen.
Medical debt is classified as unsecured debt. This means that your debt isn’t tied to any collateral. With secured debt there is collateral involved. You are borrowing money against an asset such as a home or car and if you are unable to pay the bills then that asset can be repossessed to pay back the lender. Since medical bills are unsecured, how can a creditor go after your home? Read on to see.
How You Can Lose Your Home to Medical Debt
If you’re a few weeks behind, or even a few months, a doctor or hospital cannot come in and seize your property. There is a process involved that takes time and effort from both parties to eventually put a lien on your property.
The first step taken by a creditor– in this case the hospital or doctor– would be to send you a past due letter to notify you of the outstanding debt. If you ignore the past due notice and don’t take any action to reach out to the creditor to set up a payment plan, then the creditor can go to the courts. This usually involves a period of several months or more of unpaid debt, leading the creditor to assume that you can’t or will not pay the balance.
The hospital or doctor can then file a suit against you leading to your case being presented before a judge. The judge will listen to accounts from both the creditor and yourself (or your legal representation) before determining the ruling.
If the judgement is in favor of the creditor then that means you have a legal obligation to pay the debt — even if you can’t afford it. The creditor sued you and won, so you have to come up with a way to pay the outstanding debt.
One way that the hospital or doctor now can legally take action against you after they win a judgement would be to seize some of your assets. This means that the creditor can file a lien against your home. The lien shows up on your title and the creditor will eventually get paid the money owed through the sale of your home.
Can a Hospital Force a Foreclosure?
The creditor with a judgement lien could file to foreclose on your home so that they can get their money sooner. This isn’t often worth the time and effort of the creditor though because in order for the creditor to benefit you would need to have enough equity in the property to pay back the mortgage, any homestead exemption, other prior liens and the foreclosure costs with enough money left over to pay the debt owed the creditor. Generally it’s in the best interests of the creditor with the lien to wait it out until you sell your house to get rid of your debts. The only other way to remove the lien would be to pay back the debt.
No Hospital or Medical Lien? You Could Still Lose Your Home
The reality is, even if the hospital or doctor doesn’t take legal action against you, a large medical debt could still mean losing your home. Getting behind on a major debts can lead to maxed out credit cards or failing to pay your mortgage while you try to make ends meet. Big financial burdens can make it harder to keep up with the repairs and upkeep of your home so it may make more sense to sell your home now to help pay off your debts and avoid foreclosure.
If you’re already deep in debt and looking for a way out and you’re worried about the possibility of losing your house to medical bills then reach out to Gary with Gary Buys Houses. Gary has a history of creating win-win situations for his clients, working with you one-on-one to purchase your home for cash. If your home is already in need of major repairs then you don’t have to worry, Gary will purchase your home as-is and you can move forward, debt free and on your own terms. Contact Gary today to see what he can do for you.