RSS Feeds
Facebook
GRS Twitter
Eila dropped a line this week to get advice on how to tackle her debt. She and her husband are trying to turn things around, but they’re overwhelmed by medical bills. They’re hoping GRS readers can offer direction. Eila writes:
How do I prioritize my medical bills? I have about $8000 in medical debt that’s broken up into $300 here, $200 there, $1000 over there, etc. The bills are to different medical centers, doctors and hospitals — and they all want their money today. Some are already on my credit report. One isn’t even willing to work with me on payments. I haven’t even called back because I don’t know where to start.
I’m really trying to make the debt snowball work and stop living paycheck-to-paycheck while building savings ($20/paycheck), but I have questions:
- How do I make these payments on 15 medical bills? Can I only send $10/month to each? What if they won’t accept anything less than $50? (Or in one case $120?)
- If I were to make $10/month payment, can they still put a negative on my credit report? If it’s already on my credit report, will making payments help?
How do I prioritize? Help!
I wanted a little more information about her financial situation, so I asked Eila to share her budget with us. She and her husband live in Colorado. They earn between $4200 and $4400 per month after taxes. Their expenses total $4252 per month — and that doesn’t include the medical bills. Here’s a rundown of their current spending:
- Mortgage: $1170
- Food: $600 (for a family of four)
- Car: $485
- Credit cards: $455 (minimum + $50 debt snowball)
- Utilities: $386
- Medication: $360
- Gas: $280
- Loan: $275
- Insurance: $146
- Miscellaneous: $75 (school, entertainment, etc.)
- Savings: $20
On top of this, the family has fifteen individual medical debts totaling just under $8000. They’re able to throw $50-$150 per month at these debts.
So how do you prioritize medical bills in a situation like this? I don’t know. I have no experience with this sort of thing. When I was tackling my debt, I had a handful of very large obligations. Eila has many small debts. I’m not sure my approach is right for her.
My inclination would be to pay the smallest bills first, to eliminate as many as possible as quickly as possible. Sure, that means the largest bills are being neglected, but I’d rather have just one or two grumpy creditors than a whole bunch. But I’m not sure this is the right approach.
Have you struggled with medical bills in the past? How did you prioritize them? What would you do in this situation? How is handling more than a dozen small bills different than tackling a single large debt? Where should Eila and her family start now that they’re ready to put their financial house in order?
Update: One commenter reminded me that Gerrold Mundis has an excellent book that addresses this subject. Eila may want to pick up a copy of How to Get Out of Debt, Stay Out of Debt, and Live Prosperously.
This article is about Debt, Health & Fitness Friday, 28th August 2009 (by J.D. Roth)
August 28th, 2009 at 5:20 am
I know the question is re: prioritization, but first they need to lower their expenses. Their grocery, gas and utility bills seem awfully high. I’d find a trustworthy, frugal and honest friend to give honest feedback on their spending. As for priorities, secured debt should be paid for first (car and home). Then unsecured debt. I’ve heard that medical bills should be last because they typically are seen by creditors as more forgivable when your report is being reviewed later. That doesn’t mean they shouldn’t be paid, but that they are the lowerst priority. Once you are paying on them, pay the lowest balance first and get it paid off, then move on to the next highest.
But really, they need to get their spending under control. Be drastic. Do things you’d never dreamed of doing before (rice and beans; ride the bus, sell the car, sell the house).
August 28th, 2009 at 5:24 am
Most of her spending are true obligations that she can’t adjust in order to put more money toward these debts.
It is a hard decision, but she needs to sell her car and buy a used one for cash, or get a night job. Either one would free about 500 per month.
Faced with these choices, I’d sell my car rather than take a second job.
Good luck.
August 28th, 2009 at 5:37 am
$485 a month for a car is a lot. I would look into changing that (getting a reliable used car, carpooling).
August 28th, 2009 at 5:39 am
Well, when I saw the list, the red flags to me were $485 car, $455 credit card and $275 loan which totals $1,215. Had they lived within their means like I do, they wouldn’t have any car payments, credit card payments or loan payments, and wouldn’t be having this problem. I suggest they read the book “Your Money Or Your Life.” There are too many people willing to drive older cars without payments, and who are able to avoid accruing a balance on their charge cards with monthly incomes much less than theirs.
August 28th, 2009 at 5:44 am
August 28th, 2009 at 5:45 am
I have to echo the sound advice of post #1 as this is the most-tried-and-trusted practice:
When trying to pay-off debt in a snow-ball sense, pay off from lowest balance to highest in order to gain that momentum for debt repayment. Now in regards to the actual debt repayment problem, there are only two possible scenarios: increase your income and/ or lower your expenses. This will likely free up some extra money to be placed on those unfortunate medical bills.
JD, you’ve taught us well
August 28th, 2009 at 5:46 am
Making speculation on the $360/mo for medications. That leads me to believe the medical bills are not one-offs and there are chronic conditions being treated. If that’s true then expense restructuring seems absolute paramount in avoiding future medical bills from piling up.
August 28th, 2009 at 5:50 am
In my experience, medical providers are fairly easy to work with regarding time payments and generally don’t even charge interest. This family needs to protect their credit rating by negotiating their medical bills. It can be done, and as previous posters have noticed, they have some room in their current spending to cut. And I’ll bet the $485 for the “car” is two cars (still high), maybe three, depending on whether the insurance line item is for auto insurance or not.
August 28th, 2009 at 5:52 am
I agree with Jamie (#1) and Brian (#2): it looks like reducing expenses should be a much higher priority than the order in which the medical bills are paid. Right now, their expenses eat up close to 100% of their monthly income. A family of 4 with more than $50,000 take-home can probably sock a lot more away than $20 per month, and pay more on its credit card debt and medical bills. I’m not saying it’ll be easy, but it can probably be done.
And good on Eila for making the decision to get the family finances in order. That’s a tough thing to face.
August 28th, 2009 at 5:54 am
Basically, all creditors will give you a hard time about paying them first. It’s what they get paid to do! You have to set your budget, lower expenses as much as possible, and realize that you can only do your best. You are worth respect and once you have confidence in yourself, you won’t be afraid to call the creditors back, explain the situation and let them know what you can do to pay them back.
If something is already on your credit report, then they pretty much have done all they can do to bring you down, so sending them a little money at a time, what you can afford, is what you should do. If they send you to a collections agency, even better! A collections agency will be much more likely to accept smaller payments at a time if you keep your promise and send what you said you would. In my experience, the original creditors seem to send things to collections a lot faster than they should and then only recoup a small percentage of what they are owed just so they don’t have to deal with it. (I had a radiologist send my account to collections after 30 days!)
August 28th, 2009 at 6:06 am
– Sell the *expensive* car, buy a clunker (if you have to have a car loan, it’s better that it’s $50 a month, and not the outrageous $485/mo. YIKES.) savings: at least $400
– Buy less processed foods if possible, go generic where possible. savings: around $100-$200
– Utilities seem a bit high. Set the AC between 78-80 in the summer (or keep it off and use fans) and the heater 68-72 in the winter (or keep it off and use a small electric heater in the room you’re in the most). Cancel cable tv. Downgrade phone to cheapest plan possible, buy phone cards if you use your land line only, or ditch land line and go cell only, cheapest plan. savings: at least $50
Throw all money saved from the above at the medical bills, equal parts to all bills (ie, if you save $500 each month from the cost-cutting ideas, and have 15 bills, send $33.33 to each bill, each month. As smaller ones get paid off, larger equal amounts go to remaining bills)
That’s what I’d do, at least.
August 28th, 2009 at 6:07 am
I pretty much agree with most of the posted answers so far. Most importantly, take care of your food, shelter, utilities and transportation as frugally as possible (beans and rice, sell the car and ride the bus, wear lots of sweaters instead of turning up the heat). After that, I would pay on the medical bills last. They don’t charge interest! If they go on your credit report, then so be it for now. Eventually you’ll dig your way out of the hole. We’ve been there.
And I have to respond to Sandy E (#3): you are not helping by being condescending and telling them what they should have done up to this point. Obviously, by reaching out for help, they’ve realized their mistakes.
August 28th, 2009 at 6:10 am
Would it be possible to take out a loan to consolidate the bills? Also, have you contacted all of the different places you owe money to and explained the situation? If it were me, I would make sure to keep all of the different billing depts informed.
Lastly, have you tried cleaning out the closets and having a garage sale? That might help take care of some of the bills.
Also, please note what other commenters have mentioned - this budget is not sustainable, you need to cut expenses and start repaying credit card debt, or else future roadbumps will be problems like this.
August 28th, 2009 at 6:20 am
Tough situation - your big debt load is making things quite difficult (as you have probably figured out).
I don’t have an answer about the medical bill priorities but I would say that in my opinion you shouldn’t be paying any extra amounts on any of your debts if there are other bill minimums not being paid.
You said you are doing an extra $50/month on the credit cards - I think this money should be going towards medical bills since you are not meeting the minimums there.
One other thing to consider is to try to earn some extra money somehow - part time job, odd jobs in the neighbourhood whatever. Don’t get taken in my any online scams however. This might be difficult but it would only be temporary - once you get things under control then you should be able to scale back or stop earning extra money.
August 28th, 2009 at 6:22 am
I’m assuming a consolidation loan is out of the question for whatever reason, and your attempts to get the various creditors to work with you have failed. As such, your credit score really isn’t that important right now. What do you need it for (unless your mortgage is about to come up for renewal or it will hurt your loan)?
I’d probably get rid of the little medical bills first. Your credit report is already well on its way to being shot, you can’t make all the minimums, and you don’t have a lot of money in your budget to throw at the problem. My guess is that with that much in medication, and two little people, it is difficult to earn more money. The car seems high, but you’re probably stuck with it - though you should check. Food at $600 might be reasonable depending on where you live.
I’d stop trying to snowball the credit card debt. That $50/month would really help to get rid of those $300 and $500 payments. And if the monthly minimum for the card is $400, it’s going to be a while before its paid off and you can focus on other bills.
For those bills that have minimums which are too high for you to cover, when you get to them use ING to save the money over a couple of months, and then make lump payments.
August 28th, 2009 at 6:22 am
A couple of years ago I had the same problem. I found that while they say that they won’t except anything less than $xx a month, they usually will take what you send (all of mine did). I sent $10 a month to every bill and any “left over” money to the smallest bill. I then used the snowball method to eleminate the rest of the bills.
August 28th, 2009 at 6:23 am
As someone has already mentioned, I’m pretty sure there are laws about this, at least in most states. In my experience, creditor of a medical nature are required to work with you, at least on making reasonable payments. In fact, from what I’ve heard (no experience here), if you are making any kind of regular payment to them, they’re supposed to leave you alone (as far as credit reports, harassing calls, etc. I’d still pay off anything secured first (the car, etc.)
August 28th, 2009 at 6:24 am
@ #10 — I don’t want to be an enabler. Sometimes tough love works the best.
August 28th, 2009 at 6:28 am
And you crazy Americans still are protesting about health care reforms!!! So what happens now if you get sick and you can’t afford it?
The Australian system with an English NHS style ‘free’ minimum cover (at a cost of 1.5% tax on salary) for everybody, but still with a very active Medical Insurance industry. If you earn over a certain amount and do not take out insurance, the government taxes you roughly the equivalent cost of health insurance - stopping the ‘free’ service from getting too overcrowded.
Most people from the rest of the world cannot understand the heartless approach to your health care system, but then cannot comprehend why people are protesting so much about changing it.
August 28th, 2009 at 6:30 am
Other commenters have pointed out the high monthly expenses, so I won’t go there.
My apologies if my assumptions are wrong, but I haven’t been in this type of situation. Anyway, I would caution against getting a loan to consolidate the medical bills because right now (1) there are no interest charges and (2) they are unsecured. Most people consolidate by taking out a HELOC or tossing them onto their mortgage, which makes them secured and thus the bank can take away your home if you default.
This is purely psychological, but I would try to pay off the smallest amount first. It gives you a sense of accomplishment to be able to knock a creditor off your list, even if they are the smallest one.
August 28th, 2009 at 6:32 am
As far as prioritizing, I agree that I’d pay in order of my relationship to whoever the bill is from (primary care physician first, some specialist I’ll never meet again last).
As to the specific questions…
1) I would either get in writing a payment plan from each of the debt owners and pay them like a 0% interest loan in your debt payment plan. If they won’t accept a payment low enough, don’t pay them. You don’t have the money. They may take you to court, but there’s nothing you can do about it right now. Remember, though, that these people work on commission. Send a letter straight to the company asking for a lower payment plan. They may accept.
2) As long as the debt is in collection, it’ll be on your credit report. I’m fairly confident it’ll even be on there for a number of years after you’ve paid it in full (with a note stating such). However, the good news is that most lenders do not give much weight to a medical bill in collection.
August 28th, 2009 at 6:34 am
Also, if the bills are because of something beyond her control, like her insurance agency failing to pay out on a valid claim, she should contact the credit bureaus. She can’t get the charges removed (unless they were made in error), but she can append a short (100 word) statement explaining the charge, which might help influence future creditors.
One last thought: I hope Eila has health insurance! If she does, she could look for a legal aid agency; their folks might be able to help her figure out if her insurance company ought to be paying for these bills. (If she doesn’t have insurance, it’s almost certainly worth looking into with over $300/mo of medications and regular doctor visits, even if she doesn’t face an emergency! Either way, looking into separate prescription drug plans might also provide a little bit of budgetary relief.)
August 28th, 2009 at 6:39 am
I’d re-evaluate the $600/month on food and apply the difference to the medical bills.
Ours is a family of 4 and we typically spend less than $300/month on food, and never more than $500. Our kids are small though, so I don’t know what really happens to that budget when teenagers enter into the equation.
When finances have been tight, we’ve tightened our meal budget temporarily to great success. Eating a lot of rice and beans, pasta, soups and tacos helps.
August 28th, 2009 at 6:42 am
Have you looked into debt consolidation? This seems like the type of situation that calls out for it.
I have to say that, having just dealt with a minor health scare with my son (he’s fine now) and sitting here waiting for the ER and doctor bills to start arriving, it’s frightening how quickly even a relatively inconsequential health problem can deplete an emergency fund.
August 28th, 2009 at 6:46 am
Do they have room in the house to take in a roommate? If the two kids have their own rooms now, maybe they could bunk up and share a room to free one up as a rental. That would generate income. Are the kids old enough to babysit or deliver newspapers or anything so they can contribute to the household expenses?
I think all the earlier posts about reducing expenses (especially the car payments) are great, but it’s also useful to think of ways to increase income.
August 28th, 2009 at 6:47 am
Good grief, Sandy (#16). Telling someone what they should have done in the past isn’t “tough love,” it’s rude and condescending. It’s as bad as telling a pregnant girl that she shouldn’t have gotten pregnant. It does NOTHING to help them NOW.
For the actual question… creditors would almost universally rather be paid than not be paid. They will take any money you give them, and will give you notice and notice after final notice. Talk to as many of them directly as you can, and they will be willing to be patient with you, as long as you show you are making a continual effort.
August 28th, 2009 at 6:55 am
There is some great advise here…
I think that I would reduce my c/c payment down to say, $150? then up the amount you can pay to each medical creditor.
Go snowball!
August 28th, 2009 at 6:57 am
Based on your month credit card and car expenses (maintenance + gas + payment + insurance?) it looks to me like you have consumer debt that’s at least 80% of your combined annual income, maybe 100% or more. Given that, bankruptcy is probably a good choice for you. My advice would be to talk to a financial counselor about this before doing anything else. If you did try to prioritize you bills to pay them off it would take over 7 years. Then, you need to factor in the new medical bills and other expenses that you won’t be able to pay during those 7 years. How long will those take to pay off? Compare this to the around 10 years that it takes to get a clean record after bankruptcy.
August 28th, 2009 at 7:01 am
Thanks for the great comments so far, everyone. I’ve updated the post to indicate that Eila lives in Colorado.
August 28th, 2009 at 7:02 am
Ma’am, might I suggest that you find some kind of advocate or professional advice that can help you. Googling around, I found this article that talks a bit about the laws that govern health car collections: http://ezinearticles.com/?Medical-Billing-Rules&id=1086210. I also saw some advocacy groups, but can’t comment on their legitimacy. but here’s a PDF of the fair debt collection act mentioned in the article: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
It sounds from the very brief searching that no matter what they say they have to accept your best effort payment. Perhaps you can find someone specific to your area who knows more.
JD, shame on you for being lazy. I took three seconds to find an article that at least looks like it has some useful advice a few more to find a fed govt. link with information.
You put yourself in a position of helping others with this blog, so it’s only right that when people ask you important questions that you don’t know you at least TRY to find some kind of reasonable answer.
You could use your clout as a well-known blogger to perhaps contact someone who knows the laws surrounding medical billing. You could ask a lawyer who specializes in this area for a few generalized quotes on how to handle this situation in exchange for a plug. You could do SOMETHING other than “ask the readers” which obviously didn’t generate much useful information.
August 28th, 2009 at 7:05 am
@Geoff (#19) The main issue we “crazy Americans” have with the proposed health care reforms is that we don’t want a “panel” of people that could care less deciding if we can have a medical procedure performed or not based on our age, general health, social standing, likelihood of lawsuit, or a thousand other factors. At least with the current system we have the freedom to CHOOSE to have a procedure performed.
Secondly, most of us realize that ANYTIME the government gets involved the costs GO UP and we think there is a better solution out there.
August 28th, 2009 at 7:06 am
Some are saying get their expenses under control implying they are “out of control” and there was another response to “live within their means like they do”. I find that insulting, noone knows what their medical conditions are. Medical conditions can impact other costs BESIDES direct medical costs. Being sick or having a chronic condition brings a host of difficulties into your life. Even if all it does is focus your attention away from finances for a while that would still have a big indirect cost. I would not call their spending “out of control”. Maybe they can find places to cut more but that doesn’t mean they have been reckless.
August 28th, 2009 at 7:08 am
Answer, Part II: This family can’t hope to repay their debts in four years with their current income and expense. They must make some changes to one or the other or both. The best solution, if it’s possible, is for one parent to get an additional job. Temporarily boosting income will pay this debt faster than any savings they could find in their budget. I also like the idea of increasing income by renting a room in their house as mentioned by someone above.
If they must cut spending, they need to find at least $500/mo more to pay their bills within one year. They should look at how to cut their food bill. The utilites seem really high compared to ours and I wondered if it includes cable, which could be cut. Could they cut cell phones or internet access? Reduce use of gas, electric and water? Are they in a position to reduce gasoline expense by making changes to carpooling, walking, biking? Could they sell their car(s) and buy a cheaper vehicle with the proceeds? Whether they can do any of these things will depend on their specific circumstances, but my point is that everything should be considered for reductions.
August 28th, 2009 at 7:10 am
Sandi E - This comment was totally uncalled for: “Had they lived within their means like I do, they wouldn’t have any car payments, credit card payments or loan payments, and wouldn’t be having this problem.”
August 28th, 2009 at 7:11 am
First of all Eila, I want to wish you and your family best of health. I know it must be hard. I had an outsized medical bill once due to an injury, and that really put a dent in my medical bills budget.
Second of all, PLEASE get rid of your $500/month car! If you’re making $4,400 after tax, that means you’re only making around $70,000 a year to feed a family of four. Based on my 1/10th rule, you should financially be more inclined to drive a $7,000 car. A $500/month car sounds like a $30,000+ car. Please correct me if I’m wrong.
Your car is your biggest waste of money, and is your #1 FINANCIAL KILLER. I don’t think 8 year old economy cars cos $275/month for gas either. Other than that I see nothing else you can really cut out of your budget. Maybe you should check out my spin on The 10 Cheapest Cars To Own By Edmunds and trade down? However, even here, your income should be above $135,000 to adhere to the 1/10th rule.
I’m really glad this example was highlighted, given the government just torpedoed 691,000 individuals to trade in their reasonably fine $4,000 clunker for a $25,000 car (average american car price).
Your solution is simple Eila. Once you right-size your car, just pay off in full using the debt-snowball. Saving $20/month puts your family in peril. View your car as the DEVIL that’s risking your family’s health and survival.
If it gives you any encouragement, the average income of three of my closest friends is around $300,000-$400,000, and the average cost of their car is around $18,000…. the one who makes the most ($400,000+) drives a $7,000, 9 year old SUV!
Happy Friday!
RB
August 28th, 2009 at 7:13 am
Hospitals and doctors do not want to send you to collections. They would rather you pay them back slowly than deal with getting pennies on the dollar for what they are owed. All you need to do is call up and say “Hey, I /want/ to pay my bill but I need to do it over time. Can we set up a payment plan?”
Most healthcare providers will let you pay your bills very slowly. Healthcare payment plans are usually interest free and let you pay your bills over a long period of time. In most situations as long as you are making some sort of payment you are golden.
Yes, other expenses in your budget could be trimmed significantly, but this is a big step especially in that it buys you time to sort things out.
Finally, never ever ever EVER pay medical debt with a credit card or loan. It’s MUCH easier to deal with a healthcare provider as a debtor than it is with a credit card co or a bank.
August 28th, 2009 at 7:14 am
@Chris #30 Um, we already have “a “panel” of people that could care less deciding if we can have a medical procedure performed or not based on our age, general health, social standing, likelihood of lawsuit, or a thousand other factors.” Its called HMO.
August 28th, 2009 at 7:16 am
Hardly anyone has answered the original question. I also don’t know a good answer. Would your insurer have a good answer? Your doctor’s receptionist? You might have contact with someone in-the-know about these kinds of issues. Or they might at least know someone they could refer you to.
I would definitely agree NOT to consolidate. This debt is unsecured (they can’t confiscate anything) and there is no interest.
I like the idea of paying them all a small amount per month (sounds like you could only promise $50/15 bills = $3.33 per bill month) and throwing any extra at your lowest bill. Definitely call them all up and keep them updated on your situation. Say what you will be paying each month, and when a new bill becomes the lowest, give them an update.
Even if some of them are being unreasonable, that doesn’t mean you can’t make a good effort. And I’ve heard many times that a) communication and b) actually making an effort can make a very big difference in how things get reported to the credit agencies.
If you haven’t already, you could also check your bills and make sure there aren’t any mistakes. My mom audits hospital bills for a living and it is sadly common to find errors. She once found a charge for three artificial knees; surely the person had no more than two knees that needed replacing! I found a related website here:
August 28th, 2009 at 7:17 am
@Chris (#30):
Yes, in the current American health care system, one can “choose” to have a procedure performed — if one’s insurance company will authorize the procedure and/or if one has enough money to pay for it. Those (rather poor) choices will not necessarily or even likely disappear with the introduction of nationalized health care.
August 28th, 2009 at 7:24 am
Ivy (#30) wrote: JD, shame on you for being lazy. I took three seconds to find an article that at least looks like it has some useful advice a few more to find a fed govt. link with information. You put yourself in a position of helping others with this blog, so it’s only right that when people ask you important questions that you don’t know you at least TRY to find some kind of reasonable answer.
Ivy, this is a fair complaint on this post. I didn’t make an effort to research an answer for Eila. Right or wrong, this was intentional.
I knew that I wanted this to be an “ask the readers”, one that generated reader suggestions based on reader experiences. It’s true that I could have Googled for answers, but so too could Eila. I was more interested in real-world situations.
I do like to think, however, that in most cases I provide a lot of legwork on my posts. My “U.S. budget” post (and the upcoming tax post) took 12+ hours of work, for example. I’m not always guilty of being lazy. Usually I spend too much time, in fact!
But on this post, I chose not to do any research.
August 28th, 2009 at 7:25 am
I didn’t read any of the comments - So forgive me if I’m repeating anything - But the monthly expenses for food seem very high! Do they eat out a lot? My household of two adults probably only spends $100 per month for food. We brown-bag our lunch. We don’t eat out a lot because we actually prefer home-cooked meals to resturants and fast food. I would say to look into finding a grocery store like ALDI or another discount grocery store. I also find a lot of great buys for groceries at Target stacking coupons and promotions. I think with very little effort, they should be able to slash their food expenses dramatically. That would free up more money to throw at those other bills.
August 28th, 2009 at 7:30 am
Urgh. Let’s not turn this into a debate about health care reform. It’s an interesting topic to be sure, but not one that’s going to help Eila. She has to work with the system the US has now, not one that may or may not come into being.
August 28th, 2009 at 7:30 am
What’s the payoff timeframe for the car(s)? Is the payoff amount more than what the car is worth on the used market so she’d have to bring money to the table when selling?
If you’re looking at another 3+ years of car payments and can come out $1500 or $2000 ahead on selling it, then I’d say sell it and buy something used and boring but reliable enough for day to day use.
If you’ve got about a year or less on the loan to go, I’d probably just go ahead and keep making payments on it, knowing that you’d then have a paid off vehicle that you’d probably get at least another 50,000-80,000 reasonably trouble free miles from.
If you’re $5K underwater on the car, I’m not really sure what you can do to make it better.
In terms of groceries, I know that chronic health issues can often make certain dietary patterns necessary, and you can’t necessarily go down to a beans and rice diet. But you can still probably cut down expenses there- any national to regional supermarket chain these days puts their weekly sales flyers on line. Look at what they’re lowering on prices on for the week and use that as a basis to meet your family’s food needs. Also, do some research on what different stores charge for your usual pantry staples. Sometimes the places that have a reputation of being expensive actually come in significantly cheaper on certain items than the discount grocers.
August 28th, 2009 at 7:32 am
@Ivy
After reading through all of the answers here, I feel that my inclination was correct. Any answer I would have provided in the actual post would have been of marginal value. I just don’t have experience with this, and my “book learning” on the subject is limited.
GRS readers, however, have a broad range of experience, and they’ve provided some great suggestions. (As evidenced by the many “greatcomment” highlights I had to create!)
I know that intentional laziness may still seem lame to you, but trust me that sometimes I do this intentionally.
August 28th, 2009 at 7:38 am
I suggest her or her husband get second jobs. Unfortunately, I don’t see much else she can do. As far as who to pay first… probably the ones who are demanding money the most (the ones that already are in collections).
Sorry I couldn’t be more help…
August 28th, 2009 at 7:43 am
I agree that you should first contact your medical creditors and explain your situation. They would prefer to deal with you. Once they give it to creditors, they get a very small portion of what can be collected, so that’s not the most attractive option to them (or you!). Try to work out a plan involving as many of the creditors involved. You’re in a tough situation and have my sympathy. Good luck!
August 28th, 2009 at 7:47 am
Spend less or earn more, why not do both? Either way, this is going to require a lifestyle change for the entire family. Turn off the TV. You’ll avoid advertising and have time to… get a part time job. You can sell Avon, babysit, start an alterations business, mow lawns, or get a paper route. Use your imagination. Get the whole family involved in your new frugal lifestyle. Kids really respond well to this and it will be a priceless gift to them to learn these skills at a young age. Go to the library or online and read every book and article you can find on frugal living. Make it your new hobby to save money on EVERYTHING. I believe your food budget can be reduced. Cook from scratch. See if your area has a gleaning club. Buy bread from a bakery outlet. Plan meals to avoid expensive quick dinners or fast food. Shop with a list and stick to the list. Don’t bring your children to the grocery store to avoid impulse buys. Drink more water (less soda). Check for programs like Walmart to see if you can get any of your prescriptions for $4 a month if that is less than your copay with insurance. We save $36 a month with that program, that’s $432 a year! Also, ask your physicians if they can provide you with samples of your medications. Make a big chart to put on the wall to track your progress. Then the whole family can see where their efforts are going. The bottom line is to save on everything you can. Ask yourself, “Do I really need this? If yes, how can I get it free, borrow it, buy used, or save money on purchasing it?” A few dollars here and there adds up to big bucks to put toward your debts. Once your debts are paid, keep up the frugal lifestyle and build your savings account so that you will have a cushion for your future. You will be amazed at what you can accomplish! Be patient and enjoy the process.
August 28th, 2009 at 7:48 am
I havent read the replies posted earlier before me.
But, this is what I had done when I got an emergency room bill for $2500 in a different state where I was vacationing in Seattle. I was a graduate student then, with crappy insurance. When I got a bill this high, what I did was to contact the administrator of the hospital. That did not work. So I was told to contact a social service worker who served at the hospital. She was awesome. She asked me to draft a letter addressin to the hospital and explaining my real financial scenario. She asked me to include my family situation, my salary and my insurane details and explain why I cannot pay the bill or whether a monthly interest free payment plan could be made available.
They received the letter and waived off the entire balance! So try doing that, it sometimes may work!
Secondly, the mortgage + utilities alone total to 37% of their total income. That is a lot, in my opinion.
Focus should be on reducing electricity, gas etc.
August 28th, 2009 at 7:58 am
Eila: I strongly recommend you take the Dave Ramsey Financial Peace University class. There is a section for this VERY situation, with form letters to send to your creditors and everything.
If you don’t want to spend the $100 to take the class (which I totally understand), the run down is this:
List all your past due debts. For the sake of example, lets say you past due debts are as follows:
#1 - $200
#2 - $100
#3 - $2700
#4 - $1800
#5 - $1000
#6 - $2200
These add up to $8000. Let’s say you and an extra $70 this month to pay (if you’ve taken the suggestions above, you should have much more). Pay each creditor their portion of the $70 based on how much you owe. So, creditor #4 above is owed $1800, which is about 22% of the total past due debt. Therefore, they get 22% of your $70, or $15.40.
Will they be happy with this? No. All creditors want all their money now. But, it is fair. Call them and explain that this is what you will be sending. It is all you have, and you are trying to be as fair as possible. They will try to get more out of you, but ignore them. It’s just their job. No one will take you to court if you are paying. But, if you choose to pay some and not others, the one’s you don’t pay will eventually take you to court.
Make a spreadsheet of your past due debts each month, and how much you have to give. Mail this spreadsheet to each of them with a check for their portion.
It goes without saying that you should do everything you can to increase your income and decrease you outgo so you can get back on track and on with your life. But, while you are fighting off the wolves, this tactic should keep you out of court, and give you some shred of peace of mind that you are doing the best with what you have.
August 28th, 2009 at 8:00 am
Please, those of you who recommended debt consolidation, please don’t recommend something unless you really now what it entails. Debt consolidation usually involves excessive fees and many DC companies are crooked. It’s an industry rife with ripoffs, so please don’t go this route.
August 28th, 2009 at 8:05 am
I don’t have time to read all of the replies to find out if this was mentioned, sorry if it has.
She may not truly owe that $8,000. The first call should be to her insurance company, assuming she has one. Often hospitals, doctors and labs send bills that completely ignore the amounts that they are contractually bound to charge to clients insured by a certain provider.
Collect all of the information you have about these debts. When the visit or procedure happened, what the insurance paid, etc. Call your insurance and find out what you owe out of this. Does it match what the bill states? If it doesn’t then you should call and insist that you pay no more than what they are allowed to charge. What you may find is that the hospital, doctor, etc., may be double billing you, overcharging you, and their actions may even be illegal.
Even if it turns out that everything was legit then you should still be able to negotiate down. Especially by the point it gets to the bill collector. Remember that by that point the original debtor has already discharged the debt. They sold it to a slimy company for something like 30% of the original debt. If you pay the original debtor will likely see no additional money.
August 28th, 2009 at 8:05 am
I agree with many of the posters that their bills are way too high (A $485 car payment? That seems frivalous - not a necessity.) When I was in a financial bind, I concentrated on things that I COULD change.
Utilities:
Watching consumption of resources.
No A/C, Line-Drying clothes, using only Cold Water to wash clothes. I saved $25/month line-drying 2-3 loads of clothing.
Have cell phones and a land line? Do you really need them both? We got rid of our land-line and saved $30/month. We also went from DSL to Broadband saving us $15/month.
Cable/sattelite is not a necessity. If you have it, get rid of it.
Use fans & open windows in Summer instead of A/C and wear an extra layer of clothing in the Winter-Time.
Groceries:
$600 seems steep to me. We are a family of 2 and spend $150/month on groceries by shopping at Aldi’s, Save-A-Lot, and buying items that are on sale.
Try to eat a meatless meal one or two a week to save on the grocery bill. Rice, Beans, Potatoes, Casseroles are inexpensive and filling.
Buy on sale! We are buying chicken quarters at $0.59/lb this week. You better believe I will be making alot of chicken meals this month (and chicken broth to freeze to make soup at a later date from the chicken bones.
Meds:
Can you get any of your medications in Canada?
I know people do not agree with me on this, but I saved $300 on one prescription by buying from Canada! It’s the same name-brand product.
Insurance:
Have you shopped around to get better rates?
Does your Insurance company offer paperless billing? I did not know mine offered it at a discount of $20/6 months. I signed up!
Little things like this add up.
Nothing was mentioned about eating out and entertainment.
I doubt the family of 4 does not ever go out. We consciously try to have cheap weekends. Our “Cheap Weekends” are normally $20 or less. We had friends over last weekend - our weekend was only $7. This weekend, we are going to see family for the day. The only expense will be gasoline to get there.
These are just my suggestions.
You know what they say about opinions… they are like a-holes, they all stink!
~M
August 28th, 2009 at 8:09 am
I too have a lot of medical bills, so I can relate to this situation.
In looking at the budget, the thing that jumped out at me was the expense for utilities. I would see if there is anything that could be cut out or reduced there. Switching to a cheaper phone plan, giving up cable for awhile until bills are paid off, switching off lights - changing to low energy bulbs, (Or even as I have done, switch to oil lamps and utilizing natural sunlight - extreme, I know. But my electric bill is $35 for a 1 bdrm “all electric” apartment).
Some other suggestions: when cold, throw on extra blankets instead of turning on heat, or utilize battery powered or low energy fans instead of air conditioning, hang clothes outside instead of using drier, wash clothes by hand instead of using washer. All of these things reduce the amount of energy you use and lower the cost of your montly utility payment.
The monthly grocery expense can certainly be reduced. I read about a single mom w/two kids who took care of her family on $500 a month! So it can be done. It may mean giving up some luxury foods, but isn’t it worth it to get out of debt?
Some food tricks that come to mind: get a second hand (or even free on Freecycle.com) breadmaker and bake your own bread, use powdered milk in cooking (some people will even drink it straight - it’s an acquired taste I think), grow some of your own food if you have the gardening space (you can even get the seeds for free thru some resources). Learn the art of combining coupons with store sales. You wouldn’t believe how much you can save! I cut my grocery bill in half and then by 3/4! I rarely go shopping anymore b/c I have so many sale things stocked up. The Grocery Game.com is a great resource to teach you how to do this. Someone else also mentioned shopping at Aldi - they have great stuff at a good price!
Finally as far as the medical bills, I’ve always been told that you can send in whatever you can - even if the creditor says they won’t accept anything less than a certain amount. As long as you send in SOMETHING, they really can’t say anything or penalize you because you’re making good on paying off your debt. A medical creditor of mine originally wanted $100 a month from me. I told them that my job cut my hours and I couldn’t afford that. I was able to get them down to agreeing to me sending in $25 a month.
Negotiate with them. If you don’t get satisfaction from the rep, talk to the manager. Again, as long as you send in something, they can’t say anything.
Sorry this is so long - but I hope these tips have helped.
August 28th, 2009 at 8:11 am
For 8 months I had to fight our previous idiot insurance company to pay a $900 claim. As soon as it was denied I contacted the doctors billing department as well as kept them posted regularly. I believe by communicating with the billing department and showing them I was dealing with the issue they were more than willing to work with me. In some ways they seemed surprised?? Maybe more people should make contact right in the beginning and show they are responsible and willing to work a plan to get things handled. I think good communication is key also keep really good records of all your interactions, that shows you are with it too!
August 28th, 2009 at 8:12 am
1. First thing first I contacted the hospital about charity care. I would recommend this to anyone, regardless of their income or situation. The worst that anyone can say is no but even getting a small percentage of this knocked off helps immensely. In my situation, charity care took care of 80% of my outstanding medical debts - including those that went to collections, saving me nearly $9500 in debt.
2. The legalities are a little difference once your medical debt goes to collections, but if you have medical debt that has not reached that stage, here’s a very helpful tip and little known fact: they cannot report you to collections if you are making ANY kind of payment on this debt on a regular basis. Even if it’s $5 a month, you’re covered. Just so long as you show the effort, it’s one of those things taken in good faith. They can only legally send it to collections after you have gone a certain amount of time without sending in any payments.
3. If you have debt that has gone to collections, it’s important to stay in contact with the agency but don’t let them bully you about payment plans (because they definitely will). Those agencies make get paid on how much they collect, so if you say you can pay $20 a month, they’re going to tell you that you have to pay $30. It’s their job. Don’t let that put you off.
4. I requested statement accounts from all my collectors and used those to set up a payment plan a la debt snowball. I sent out monthly checks via my credit union’s online bill pay, $20 minimum unless I was paying something off. Since I’m already used to paying around $150/month for medical debt, the more of the smaller debts that I pay off, the more I can apply to the larger debts. Out of 12 open medical accounts, I have paid off 7 since January 2008 using this method (also including a two month unemployment stint where I couldn’t pay anything). I still get letters requesting $25 (as opposed to the $20 I’m sending) but the phone calls have stopped.
Hope that helps!
August 28th, 2009 at 8:13 am
Another Canadian here…so no experience with medical expenses, but as a mother whose child spent 3 months in intensive care I fully understand the strain medical issues can put on ALL aspects of your life(quick take out meals grabbed between trips to the hospital, endless gas bills from the travel back and forth, missed work days, etc. etc)…best of luck to you…I hope you are able to find the answers you are looking for.
August 28th, 2009 at 8:15 am
Eila clearly wants to prioritize the medical debt, so I’d suggest putting the CC snowball on hold, or decreasing it to $5-10 and putting the remaining $40-45 toward the medical debt until it’s more under control. It’s going to cost more in interest in the long run, but if she has identified medical bills as the highest priority, then that’s what it should be for now.
Then, not that it will make life easier because you’ll still be getting constant collector calls, but stay with me for a moment: I’d ignore the medical debts that are already in collections (for the time being). They’re there, they’re on the credit report, and they’re probably staying there, even after they’re paid off. Please don’t read this as “ignore the collections forever.” I’m just saying they’re at the bottom of the priority list for now.
Focus on negotiating payment plans with the creditors that haven’t sent you to collections yet - to keep yourself out of collections on those accounts. Especially with your primary care provider, as another commenter said. Once you’ve paid off one or two of those, you can start giving money to the accounts in collections or speed up the repayment of the non-collection debt, and then tackle the collections accounts after.
As for the ones who won’t accept less than XX - like I said, if it’s in collections, just ignore them for now. Eventually, they’ll take whatever you send in. It’s not like they’ll send back your $10 check, but it’s no use negotiating now when you have non-collections debt to deal with. If they’re not in collections, it’s going to be more difficult. Try to explain the situation, and if they won’t take less than $50 and it is your primary care physician, perhaps that bill gets $50 and the others have to split whatever is left. If they really aren’t working with you, at this point, you might have to face the fact that another one will end up in collections, but in the long run, that’s more money you can use now for non-collection bills, and perhaps a settlement for less later.
That said, I would very strongly recommend looking at your expenses and cutting back anywhere you can. Look into getting generics for your prescriptions if you’re not already. If you’re going to regular doctors visits for something chronic, ask if there is a comparable, but cheaper alternative to the current medications. Try to get some sort of debt consolidation plans for the CCs that will lower that payment (but not the medical bills - keep them interest free). The truth is, you can prioritize all you want, but there’s just not enough money to cover it all unless you cut expenses or raise income. If that means another job, odd jobs, having a garage sale, etc, you should do it, because that’s what it’ll take to really get rid of your debt.
And please, as someone who has been in the kid in a similar situation, do whatever you can to absolutely never ask your kids to help pay household bills (as commentor Trini suggested). But, if they are old enough to have a job, they’re old enough to have a discussion about how mom and dad can’t afford to pay for them to go to the movies with friends, or pay for minutes on a cell plan to talk to their friends, etc. If they want those luxuries, they can pay for them themselves. And if some of those car expenses are for a kid’s car, discuss the fact that they need to help pay for those expenses (at the very least for anything not related to school/work - and really, they should be riding the bus to school).
August 28th, 2009 at 8:19 am
@Chris #31
At the risk of being a part of derailing the comments, as a physician I take issue with your interpretation of the proposed healthcare reform. The panels you suggest are not what is being proposed (i.e. “determining your worth to society). The legislation wants to create an agency and increase research funding to determine whether one treatment works better than another, with the goal being not to pay for treatments that don’t work. Right now we doctors have a lack of research to back up a lot of what we do, and in some cases do things that specifically are likely not to work (give antibiotics for viral respiratory infections, for example, because patients want them).
You say the costs of healthcare go up when the government is involved, but the people who get billed the most are the self-pay patients (like possibly Eila was), insurance companies get better deals and then Medicare/Medicaid probably pays the least for any given appointment or procedure - which isn’t great for us doctors but just to explain to you how it works. The other thing this bill will do is adjust the payment formula in a much needed way to ensure the payments to physicians are increasing each year at a sustainable rate - currently each year the payments to physicians are scheduled go down by a percentage, which obviously doesn’t even keep up with inflation. I’m hoping this bill passes!
I think that these ideas have value and for me in the emergency department, this healthcare reform would mean that all of my patients have at least some ability to pay the bills, rather than a large percentage of them never paying at all and my hospital having to eat the cost. Since most of my patients are already on Medicare or Medicaid, the idea of the government running healthcare doesn’t scare me. They already do it for millions of people including 95% of those over 65. At least they pay the bills we send (no offense to Eila, whose situation looks tough and I understand how difficult it must be to get all these bills paid).
August 28th, 2009 at 8:19 am
It looks like they’re already too tightly balanced to do anything drastic. I agree with paying the smallest ones first. 15 separate bills is overwhelming, and the more of them you can get rid of, the greater the sense of control.
The other point is that it might be worth allowing the one or two biggest ones some time to hang out to dry. The longer they sit out there, the more likely the provider will be to accept a settlement, as in reduced settlement.
Her credit may take a hit, but you can’t do what you can’t do, and if some of the accounts are already on the credit report, that’s probably happening already. Medicals don’t usually report until an account is placed in collection.
August 28th, 2009 at 8:39 am
I’ve been in this boat - literally.
What I did (acting upon the advice of a Radiologist’s billing lady) was I called the hospital & got the paperwork for hardship - included copies of all my bills when I sent in the hardship paperwork (it’s better to send too much documentation then not enough). I thought I’d get denied but I didn’t. The hospital took care of 80% of the balance and then all except one of the other providers reduced their charges accordingly.
The hardship funds from the hospital were provided by non-government charity contributions & the hospital told me that since so few people apply for hardship the funds are usually just sitting there.
And before anyone cuts me down for what I did - once money was straightened out I have been donating to that hospital’s charity fund to try to “repay” the grace they bestowed upon me when I needed it.
I’ve been told in the past as long as you pay $5 a month that rarely will they come after for more - that it shows good faith & isn’t worth their time to send to collections if they are patient. Personally I’ve never had a medical bill go to collections if I’m paying something on it each month - even less then the minimum they set and I’ve had a ton of medical bills in my adult life.
Hope this helps & remember the worst the hospital can say is “no” to the hardship stuff.
August 28th, 2009 at 8:43 am
I agree that Eila or her spouse should speak directly to their insurance company(ies) and medical providers to clarify what insurance will pay and should pay and what they can afford to pay. Work out a payment plan for all providers, even if some have to wait a few months while smaller bills are paid off first.
I won’t comment extensively on the rest of Eila’s expenses since we didn’t get complete information on what they owe (total balances on credit cards, car loan, other loan, and mortgage and whether that’s one car loan or two) but I will say that now is a good time to refinance loans, whether it be a car loan or a mortgage. If Eila can lower her mortgage payment by $100 or $200 a month or a car loan by $50-100/month, that’s money that can be used for medical payments now and an emergency fund later. I would also suggest checking to see whether some of the prescriptions can be bought at Walmart (they have a $4 plan for commonly prescribed drugs) or bought by mail order (one co-payment/drug every 3 months rather than one every month).
I don’t think their grocery bill is out of line: $600/month for 2 adults and 2 children. My husband and I spend $400-450/month for 2 adults. Sure, one can buy a lot of cheap crappy processed food for less money. But to maintain good health, one must cook from scratch and eat lots of fresh fruits and vegetables. That’s not always an inexpensive proposition. Throw in the cost of household cleaners and paper products and it isn’t difficult to ring up a huge bill.
August 28th, 2009 at 8:47 am
“My inclination would be to pay the smallest bills first, to eliminate as many as possible as quickly as possible. Sure, that means the largest bills are being neglected, but I’d rather have just one or two grumpy creditors than a whole bunch. But I’m not sure this is the right approach.”
I agree with this totally. I’m big on “get the easiest stuff out of the way first” when you are trying to tackle a list of tasks. This should work here too - get it narrowed down to the two or three biggest bills and you can concentrate all your efforts on those.
August 28th, 2009 at 8:52 am
Medical bills fall into the same priority as everything else in the debt snowball. Smallest balance first. Yes, they’re going to kick and scream when you’re not paying them. Yes, your credit report will probably get trashed. So what? Are you going to borrow money again after this? I didn’t think so.
That said, here’s my perspective. I am an FPU coordinator in Colorado, so this is similar to what you’d hear from Dave Ramsey :-).
Sell the car, immediately. That is your highest priority. If you’re upside down, then you have to get a loan to cover the difference. If you don’t have the money to buy a (cheap!) replacement car, you’ll have to borrow for that too, but don’t spend more than ~$2000 on this replacement. It’s not forever, just until you get the mess cleaned up.
Medication at $360? Is that with generics? If not, your next hobby after selling the car is to switch all prescriptions to generics.
Utilities at $386 seems high, but that might include TV and cell phones. If that includes TV, cut that immediately. Contact the utility company about doing an average-month payment. Reduce energy consumption where you can, it really does make a difference. Look at low cost ways to winterize your home, $40 now really can save you hundreds in the next several months. Drop your cell phone usage, or if its not essential to your work, drop it entirely and use a low cost land line option like Vonage. If a cell phone is essential to work, then inquire about having them pay part of it. What’s the worst, they say no?
Sorry but you don’t have an entertainment budget anymore, you need every penny you can get. School costs are probably okay, but since that’s lumped together its hard to be sure.
Food at $600 for a family of four seems low to me, actually. It sounds like there’s a lot of quick and cheap processed food, or fast food in there. Eating crap will contribute to health problems and increase your medical costs. You know this, everyone knows this, but do something about it!
I would consider a second part time job, but stay away from those “CEO income from home” scams. There’s other things you can do from home. An excellent book on this topic is “48 Days to the Work You Love” by Dan Miller.
As suggested earlier, you should take Dave Ramsey’s Financial Peace University. If that’s too much right now (usually ~$100), at least get a copy of Dave’s book the Total Money Makeover.
Finally, start educating yourself on personal finance. You’re in this mess because you probably didn’t know any better, like most of Americans struggling with their finances. Reading this blog is a good start! JD has a lot of resources here, especially the in-depth book reviews. Dave Ramsey has a lot of books on his recommended reading list as well (some of them reviewed by JD).
August 28th, 2009 at 8:52 am
I guess it depends on whether you personally prefer the psychological benefit of paying off the smaller bills first, or would rather send something to everyone, even if it’s a tiny amount. Not something someone else can answer for you.
I had a medical debt of about $8k but it was only to one provider. When they found out my insurance covered so little, they took $900 off the top. After that I paid what I could every month; usually $50, sometimes $25, a couple of times $0. A few years down the line I got a better job and started paying $100 every month. As I got close to the end I called them to find out my remaining balance, and they took another $300 off in appreciation of my continuing to make payments. Apparently most people give up quickly in the face of such a large bill. It took more than 5 years but I paid it off; no interest, no collections, and they THANKED me.
August 28th, 2009 at 8:56 am
I did a search for statutes of limitations on debt collection for the state of Colorado. Here’s what I found:
from http://www.fair-debt-collection.com/SOL-by-State.html
Colorado Statutes of Limitation
Domestic and foreign judgments: 6 years and renewable each six years. Note: If for child support, maintenance or arrears the judgment (lien) stays in effect for the life the judgment without the necessity of renewal every six years.
All contract actions, including personal contracts and actions under the UCC: 3 years (C.R.S. 13-80-101), except as otherwise provided in 13-80-103.5; All claims under the Uniform Consumer Credit Code, except sections 5-5-201(5); All actions to recover, detain or convert goods or chattels, except as otherwise provided in section 13 -80-103.5.
Liquidated debt and unliquidated determinable amount of money due; Enforcement of instrument securing the payment of or evidencing any debt; Action to recover the possession of secured personal property; Arrears of rent: 6 years, (C.R.S. 13-80-103.5)
So assuming the website is accurate it looks like they have 3 years on contract actions. I would think a medical service would constitute a personal service contract and fall under contract actions. (If they have already sued you and received a court judgment against you for the amount, they have 6 years to collect it, but then they can get that extended another 6 years.)
DISCLAIMER: HOWEVER, I am NOT a Colorado attorney. I also looked at the other part of the statute, http://www.michie.com/colorado/lpext.dll/cocode/2/20396/23cff/23d01/23eb7?f=templates&fn=document-frame.htm&2.0
which discusses which debts have a statute of limitations as 6 years. It looks like those are for secured debts, bad checks, etc. However, the statute is confusing and your best bet is to talk to a licensed Colorado attorney at a free legal aid service to confirm what the SOL is.)
That said, you might want to consider how old the debt is when figuring out which ones to pay first. If you just decide not to pay some of them that are old, know that it would still affect your credit.
I suggest you go to a non-profit credit counselor to get some help. Also read the Fair Debt Collections Act to see what creditors are allowed to do.
The Federal Trade Commission has a lot of good articles to read about getting out of debt.
http://www.ftc.gov/bcp/menus/consumer/credit/debt.shtm
I also want to mention a FREE snowballing website that I use. It is a little hard to get the hang of it but it’s worth it. http://www.whatsthecost.com You can set up a snowball and edit it to see how making different amounts of payments will pay it off faster. You can also set it up to calculate your debts in interest rate order or to pay the smallest ones first, and it tells you the difference of the cost you will pay if you do either. VERY HELPFUL.
August 28th, 2009 at 8:58 am
I can feed my family of 4 for 100 per week. Sometimes less. Bring a list and only get what you need. buy in bulk where you can and eliminate the unhealthy snacks. That will save you $200 per month right there.
August 28th, 2009 at 9:11 am
I have been there, being a person of no medical insurance for years. What I learned:
- paying at least $5 a month, showed attempt to pay
- they can take you to court, but the judge will see the numbers and ask why, when you are paying what obviously can (so most drop the heavy pursuit with payments)
- even when they say they can’t take less of a payment they will.
- debating on your tax situation, you may want to consolidate and pay to get the write off (but not always)I see they have $4320 a year in meds, this with the debt could be making payments tax deductible.
Don’t hide. Talk to all. Stay calm. Be firm [this is what I can and will pay, should more money be available I will increase the payments. BUT I WILL PAY MY DEBT.] These words can really help, then back your word. Honesty gets you everywhere.
With $150 to pay down on 15 bills, I would pay $5 a month to 14 bills and $80 to the smallest. Making the snow ball roll with in 3 months if the smallest bill is $200. Fast progress and peace.
August 28th, 2009 at 9:12 am
I agree with the debt snowball approach, but I’d split it in haf. First, take care of the ones on the credit report, starting with the smallest. Then, move to the others, one at a time.
There appear to be some places where they can cut spending as well, like groceries.
August 28th, 2009 at 9:17 am
Where should Eila and her family start now that they’re ready to put their financial house in order?
Call all your debtors, INCLUDING UTILITY COMPANIES and explain your financial sitution. For example, some electric companies will put you on payment plans (though usually it is when you are already behind but it is worth asking).
Beleive it or not, some credit card companies will lower or remove intrest rate for a season of 1-12 months. Its a long shot…but worth asking.
Also, in case you can’t sell your car as suggested, ask the bank about a deferred payment. Usually they will defer a month payment (warning…you will still pay interest)…but that additional $485 if only a month, could be used to knock out a couple medical bills.
Also, check out Angel Food Ministries…they provide food for $30 box…you can get as many $30 boxes as you want, plus they have additional combo packages you can order. You don’t have to be in a certain financial bracket to use them and the food arrives frozen and fresh. It may help you cut down on your grocery bill.
Finally, in regards to the order of medical bills, I would attack them in this order:
1. Smallest
2. Not on Credit report
(If they are not on the report maybe you can keep them off)
3. Those willing to work with you.
4. Those not willing to work with you.
It may seem backwards to leave those not willing to work with you for last, but the reality is they are probably already affecting your credit score. It sounds like you already have a house and car so I’m going to assume there are no major purchases that would require a good credit score in your immediate future (next 1-3 yrs).
Mitigate as much damage as possible by clearing those that are willing to work with you. You can continue your medical debt snowball and your credit report / score will rebound over time.
Good Luck & Best Wishes!
Kita
August 28th, 2009 at 9:18 am
When we first started to get out of debt, we had very high debt loads as well. The only way to really attack it and get it gone once and for all was for one of us to take a second job.
I worked in a hospital for $12/hr after my full-time job and took home about $800/month for 18 hours a week. If Eila did something similar, her entire medical debt would be gone in 10 months. In 10 more months (just over a year-and-a-half total), she’d have $8,000 in credit card bills gone.
A second job did absolute wonders for our financial situation, and I highly encourage Eila’s family to do the same. It is not fun, but at least I was able to sleep peacefully at night because I wasn’t worried about how we’d pay the next Visa bill.
As far as prioritizing the medical debts, I’d go with the doctor you see most frequently first because some will not see you if you have outstanding bills.
Good luck, Eila!
August 28th, 2009 at 9:30 am
@Chris (#31):
“The main issue we “crazy Americans” have with the proposed health care reforms is that we don’t want a “panel” of people that could care less deciding if we can have a medical procedure performed or not based on our age, general health, social standing, likelihood of lawsuit, or a thousand other factors.”
Yeah! You tell ‘em, Chris! Government has no business making that decision! That decision should stay exactly where it belongs!
With the insurance companies!
August 28th, 2009 at 9:32 am
Love your comment, Kevin!
August 28th, 2009 at 9:41 am
@Des (49): If she does this method, it’s going to take her 113 months to pay off that theoretical $100, and roughly the same for the theoretical $2700.. If she instead put $10 to each bill and $20 to the $100 bill, she would have the $100 and $200 bills paid off within a year, and the last one paid off about the same time as the percentage way you described above.
I haven’t taken Dave’s Financial Peace classes, but I am reading the book currently (TMMO, not FP), and is this a different situation than a regular snowball? It just seems like his method is all about the momentum, get one paid off, it fuels you to pay off another.
August 28th, 2009 at 9:43 am
My family recently had several medical bills that it took over two years to pay them in full (on one income with 6 mouths to feed). A couple suggestions:
a) Go to http://www.becentsable.net to learn how to cut your grocery bill.
b) Hide the credit cards so as not to use them and put yourself further at their mercy.
c) If the bill has already gone to a collection agency: KEEP ALL RECORDS OF TRANSACTIONS AND CORRESPONDENCE!!! One of our bills was paid early on, but two years later we found out the collection agency never paid the doctor’s office. Keep all bank statements, or money order receipts and the agencies contact info. It may come back to haunt you if you don’t
d) If you have a cable bill, or use two cell phones AND have a landline, consider disconnecting some of those expenses for a few months until you can comfortably spare the income for them again.
e) If a second job is not an option due to the medical problems sell some of the clutter sitting around the house. Sports equipment? Baby stuff? Extra furniture that’s just storage for extra stuff? Books, DVD’s, CD’s? An extra $10-30 a month really makes a difference.
f) And if it wasn’t mentioned before, try to use generic brand prescriptions, and limit doctors visits. If you have to make an appt and pay a copay, just to find out test results, just call the office instead and see if you can get them over the phone, or have them mailed with any instructions.
August 28th, 2009 at 9:48 am
A few comments:
1. I think we need a little bit more information before we try to tell Elia how to cut her budget. A lot of people have assumed that $475 is for one car - maybe it’s two.
2. Apparently no one that has commented lives in CO, or knows someone who does. A lot of CO is rural, and you HAVE to have a car to get to work. Depending on where you live in CO, the cost of living can be pretty high - higher than most places in the Midwest at least - so that may explain the higher utility bills. It’s also colder for a longer period of time in that region, which could explain higher utility bills. And if they’re spending $360/mo on medications - which someone else said could indicate other health issues or chronic problems, perhaps turning down the thermostat would not be good for a family member’s health.
From the information that we’ve been given it looks like the medical bills are not the only problem this family has. But telling Elia how to cut her budget is not answering the question of how to prioritize her medical bills. Elia probably needs to have a trusted friend or family member who has their financial act together & knows her family’s situation to go over her budget & see if they can free up some $$ to go towards the medical bills. And perhaps then that person could help the family deal with the medical bills themselves. Good luck to you, Elia.
August 28th, 2009 at 9:48 am
As a rebuttal to those criticizing the fact that comments haven’t answered the actual question, I thought the idea of a “debt snowball” had that nailed down. I did see a budget that most likely has space for some improvement. My suggestions:
1.) If it’s a debt snowball, make it so. Drop the distinction between credit card and medical debt. Lump them all together and add the $50 over the minimum on the credit card to the medical debt payments. Disperse it as normal for the snowball.
2.)Reevaluate the vehicle(s) it may not be advisable depending on the loan situation but, I’m driving a $4000 dollar car that was purchased with cash (5 years ago) and it doesn’t hurt me. Don’t assume that because there are children that things like (automatic) sliding doors on a minivan are necessities. I can put two car seats or two teenagers in the backseat of my car just as safely.
3.)It’s not easy, sacrifices will have to be made. My parents get more enjoyment out of free over-the-air TV than I do out of my $40 cable TV (I pay it for the cable internet which is $35 alone). Which brings me to my final suggestion, don’t just call people you owe money too. Call the cable company, insurance company, etc and talk to them about reducing your bills. My wife and I spent a grand total of five minutes with an insurance guy and our car insurance got reduced by $400 a year (we’re 23). I would call the cable/satellite company right now and ask about getting the rate new customers are getting or tell them you have to cancel because you can’t afford it. Don’t be afraid to cancel if they don’t give it, there are other options out there. Bottom line call every single person/entity you send money to and ask if there is any way to reduce your monthly outlay.
August 28th, 2009 at 9:56 am
What a tough situation to be in! Props to you for asking others for help.
I used to work as the financial coordinator for a birth provider and had a few clients who owed us thousands of dollars (birth is not cheap) and weren’t making any payments. Tracking them down for the debt was part of my job. It’s not fun for anyone. You mentioned that you haven’t even called back because you don’t know where to start, and that one provider isn’t willing to work with you on payments. Well, they’re just going to have to.
MY first piece of advice would be to CONTACT ALL YOUR PROVIDERS WITH A *REALISTIC* PAYMENT PLAN. The worst thing you can do is to stop responding to inquiries about your obligations. Any good faith effort will help, I PROMISE - but you MUST FOLLOW THROUGH. I literally had one client who could only afford $10 a month, and she sent that $10 without fail for years. The only thing she ever got from me was her regular statements.
Try to stay as rational as possible when you call - it’s very easy to get emotional and worked up, especially when someone tells you they won’t work with you. They want your money now, but the reality is they aren’t going to get it right now. Be polite but firm. Explain your situation and tell them what you can do. If they say that’s not good enough, tell them you understand their position, and you will be sending what you can. Stick to your guns.
Even if it’s just $5 (heck, even if it’s just a DOLLAR) a month to each provider, do it. Something is better than nothing. But you must do it EACH MONTH. This is so crucial. You can increase the amount as you are able. If you haven’t been in touch with a provider, $5 isn’t going to thrill them, but consistency WILL.
If I received only a $1 from someone who owed a lot of debt, I’d think it was a little weird at first, but if I got that $1 for six months straight and then started getting $5, I guarantee you I’d work with you.
Since it’s spread around, I think a little to each provider each month will get you started. If one of the amounts is low - you mentioned $100 - I would send everyone $5 (or $1!) and pay that one off in one or two months if you can, to give you the psychological boost that you so desperately need.
After you’ve crossed that off (woo hoo!), I also agree with the advice to make sure your primary care doc’s debt, if you have any, is your priority. So if you can throw a little more at that, do it. You don’t want that relationship to go south for non-payment.
The money’s got to come from somewhere, though. I would recommend paying the minimum without snowballing your credit card right now (maybe you can get them to lower your minimum payments?), and I would stop saving for a while. That’s $70 total right there, which could send a little bit to each provider without changing your budget too much.
You will have to cut somewhere and it will be hard - car, food, bills, entertainment, whatever, but once you get out from the weight of some of this debt, it will be much easier and you will begin to regain control.
Here’s to breathing free!
August 28th, 2009 at 10:02 am
@Diana
No, if the debts are not current and are in collections, it is a different situation than the debt snowball. there are more factors to consider than just how much you’ll pay in interest and how long it will take to pay them off. If she stops paying on any one of them, she risks being taken to court. Then, she will be hit with fees and other expenses, which will put her further behind. The method I outlined is what Dave Ramsey advocates, but another good alternative would be what “Dedicated” says above - $5 to each of them and the balance to the smallest.
It is essential that she continue to pay SOMETHING to each one, and continue to keep lines of communication open with them.
The point Ramsey makes with his method is that you are making an effort to be fair and methodical. It’s easier to have a firm hand with all the noisy creditors when you know you are doing your best to get them their money as fairly as you know how.
August 28th, 2009 at 10:06 am
@Barb1954 I disagree that adding “paper products and household cleaners” adds to your grocery bill. In all the talk of reducing expenses here, I haven’t seen anyone mention how cheap it is to make your own household cleaners. You don’t need separate cleaners for toilet/tub/kitchen/sink/floors. All you need is a gallon of white vinegar, a big box of baking soda, and some liquid soap. Check out the book “Green Clean” for ideas on making all kinds of cleaners for pennies.
Also, don’t bother buying paper products. Use old t-shirts, old towels, old socks as rags. I never buy paper towels…expensive and wasteful.
August 28th, 2009 at 10:13 am
I’ll run through a few ideas. They are brainstorming and concentrating on the holistic income picture. Your income is pretty decent, so running through some expenses might help out to free up some more cash.
* Mortgage: $1170
Is this fixed rate or adjustable rate? Is it possible to refinance by some means to get the amount down? If it’s adjustable, will it be adjusting upwards anytime in the future? Do you have equity in the house that you could access, either through a HELOC (although to some extent, that’s robbing Peter to pay Paul), or by selling the house and renting? Are prevailing rents in your area significantly cheaper? At this rate, you barely get any tax advantages for keeping the mortgage since (IIRC) the standard tax deduction is about $11K.
* Food: $600 (for a family of four)
You might be able to trim some expenses here, maybe. We have a family of four and have tied time and time again to get this number down — but inevitably it runs $7-800/month where we live. There are some Federal stats for what it takes to feed a family and IIRC the number is something around $700. I’d be concerned that you are making good food choices (fresh veggies, non-processed, etc) and not buying stuff that will contribute to health problems.
* Car: $485
As other posters have pointed out, this is a real killer. If you could somehow get rid of this expense by selling the car and picking up something decent and used, it would make a huge difference in your budget. It doesn’t necessarily need to be a junker, even — if you could sell the car, pay off the loan and pick up something for $4-5K you can likely find a nice, dependable sedan — and you’d have $485 more a month, which would make a world of difference in your budget — you could knock out a lot of the small bills very quickly.
The only possible exception is if you are close (meaning a couple of months) to paying off this car. Please please please don’t let this be a lease ……
* Credit cards: $455 (minimum + $50 debt snowball)
Here’s another thing that’s absolutely KILLING you. You need to cut the cards up and agree never to use them again. Right now with this and the car you are spending $900 per month. $900/month would absolutely rock your world in getting back on your feet. Of course, that’s a bit of hindsight — but the fist way to get out of a hole is to stop digging, and you can agree to do that right now.
You might be able to call the company and get the interest rate reduced, as well. There are a number of scripts you can follow to get it reduced with a phone call.
* Utilities: $386
This ties into the house/mortgage question a bit. Do you have too much house? Can you cut back in some way, as indicated by other posters? I’m betting, though, that this number is pretty static and the only way to make a significant drop is to downsize the house.
* Medication: $360
Is there a way you can do mail order or multiple-month supplies? Fly to Canada once every few months? Go generic?
* Gas: $280
Is carpooling an option to get to work? Driving less? I’m guessing that there’s likely only an incremental improvement at best here.
* Loan: $275
Loan for what? If it’s something like a boat or some other toy, sell it and pay off this loan. Adding this in with the car and the credit cards, we are now up to something like $1200/month going out. Talk about rocking your world if you didn’t have this! Again, hindsight, but an idea of where you can go and what you can do if you stop digging the debt hole.
* Insurance: $146
Maybe you can cut stuff here — raise deductibles (assuming your emergency fund can cover them) on the house and the cars. If you sell the car and buy used, then this amount will likely fall, too.
* Miscellaneous: $75 (school, entertainment, etc.)
* Savings: $20
Not much you can do here.
Overall, though, concentrating on your medical bills alone isn’t going to solve your problem. My wife and I realized about a year ago that we were heading nowhere fast financially and read “The Total Money Makeover” by Dave Ramsey. It’s entirely changed our world. I highly recommend it. If you don’t want to read it — that’s fine. J.D. has recommended another reference, and I’ve heard good things about Suze Ormond’s work. Whatever you use, you you need an overall plan for all of your income that you and your family buy into. It’s much easier when everyone in the family knows what’s going on, why you are doing it and what the eventual goal is.
Quite honestly, a lot of the talk about switching off the lights, making your own toilet paper, cleaners, etc — they are all good ideas that can save you money. At this point (IMHO) you need to be thinking more about your game plan for the next week, month and year than saving $1 on paper towels.
On a personal note, following Ramsey’s plan we have paid off our car in the last year, as well as made significant progress on other debts. My spouse was laid off yesterday — which we are taking more as a blessing than a panic since we know we can do well on one income, in addition to severance benefits and unemployment compensation. If we didn’t have a plan, we would be in absolute panic mode right now. So there is a definite benefit to getting a plan together for ALL your spending and not just one category. Again, I’m not saying you need to follow Ramsey’s plan — you need to find A plan that meets your needs and stick with it.
You also need to (as others have pointed out) realize that the debt snowball is ALL debt, not just one class of it — so concentrating on medical debt is missing the whole point of the snowball. You are spread too thin and you really need to get some “wins” under your belt, get some of those people off the phone.
Also, as others have indicated, you can sell things, too. And yes, if you have services in there that are not absolutely essential to food, shelter and water — you should drop them or find drastically cheaper options. Examples:
- Cell phone: drop the contract and go prepaid. Or drop it altogether. Probably saved $50/month.
- Cable TV: get the converter box and go over the air. Probably $50/month.
- Netflix/BB/Redbox: your local library likely carries much of the same, for free.
- Phone: Can you drop the landline? Can you get a VOIP type of service? Vonage? We went from landline at $75/month to a VOIP service provided by our phone company for $30/month — and they provide all equipment and maintenance, in addition to unlimited long distance in the US.
August 28th, 2009 at 10:36 am
8000/50 = 160 months = 13+ years. This is simply too long. You should take the advice above and either increase income, or vastly reduce spending.
It seems you guys are spread too thin, and have overreached what your income should provide. At about 5% interest, your home is nearly a quarter million. Is this something you need? How about the car, can you guys sell it and get an older, smaller SUV?
Before even thinking about what debt to pay off, you need to find at least a few hundred a month to help pay. In your budget, with some sacrifices, this should be extremely easy. Step 2 would be which items to snowball first.
August 28th, 2009 at 10:40 am
I wonder if it would help to pay these expenses out of pre-tax income.
If it’s possible, a better option would be to open an HSA and send the repayment money through that. If it works out, it would increase your effective repayments by 50% or so, depending on your marginal tax rate.
Otherwise, if your medical expenses exceed a certain proportion of your income (I think it’s 7.5%?) you can claim them as a tax deduction.
August 28th, 2009 at 10:46 am
I’ve been skimming a bit so haven’t read everything in depth — @60 is probably the best answer so far. To have lots of little bills from lots of different people sounds like an emergency room/hospital visit — if this is the case call the hospital and ask to speak the patient advocate or one of the social workers. Explain your situation and any ongoing medical issues (which your high pharmacy bill seems to indicate you have) — they may be able to deal with everyone for you or help you get a discount or hardship assistance. You also need to be upfront with your doctor’s about your financial situation. My doctor was able to get me vouchers for a rather expensive drug I needed since it wasn’t in generic yet and he provides me with samples — he also switched me to a less expensive scrip that was on the $4 list at walmart. All of these things have brought was was $450/month pharmacy bill down to $60. Depending on what your medical condition is and your insurance situation you may also want to think about contacting your state’s high risk pool or applying for medicare due to disablity (sometimes you qualify for health care even if you don’t qualify for dissablity payments) — they will sometimes backdate your coverage to when you first became ill and pay everything off.
I know it is hard when you are sick and the money just isn’t there — its all well and good for people to say get another job but if you are sick there is a good chance you can’t. I hope you feel better and I hope you find a way to deal with everything — I’ve certainly been there.
August 28th, 2009 at 10:57 am
I think there has been a good deal covered about how they can reduce some of their expenses. With a family they might have to keep the car. They might need to keep some of those expenses. My question would be how can you increase your revenue. I think reducing debt is only one half of the equation.
How can they get a part time job, sell something, or start a business that would generate extra income. No matter if they have the medical bills they are living with no emergency cushion, and no way to save for education or travel. I would look into how to make more money.
August 28th, 2009 at 11:04 am
Kristen @ 77 was probably one of the more helpful responses - and she was kind and respectful.
Combining her thoughts with several others’, I would try first to work with the hospital to find out about the “hardship” option or to find out if there are non-profits that they work with who help those in financial need. Charity exists for those in need. It sounds like your family is so please don’t feel badly about exploring these options. Are you a member of a church or fraternal organization, etc to which you could express your need?
At the same time, I would contact all the billing folks at each vendor and let them know you will be paying $x each month. Don’t let them bully you!
I’ve had to make those calls myself and it’s terribly hard. It’s emotional and you feel embarrassed. But you’re taking the right step by dealing with it head on and that is empowering. Most times, if you remain calm so will the person on the other end of the line. If they give you a hard time, ask to speak to their manager and keep moving up the chain until you find somebody reasonable. Keep communicating that you take responsibility for the charge, but that you just do not have any more than $x each month.
August 28th, 2009 at 11:06 am
I’m a longtime reader here and rarely post, but I had to speak up…
My wife and I are Americans living in Canada.
We shake our heads in disbelief when we watch the current debate about health care reform.
We’ve lived under both the Canadian and American health care systems. The Canadian is far better, more humane, and a true blessing to live under. This poor person’s story is a great example of why.
My wife and I both work in professions that would pay us significantly more in the US, but we choose to stay in Canada instead. And one of the main reasons for this choice is the health care system.
I’d rather have a ‘government bureaucrat’ deciding my care over an HMO bureaucrat with a profit motive any day.
When you’re sick in Canada, you just show up to the hospital. You get the care you need. And the only bill you might ever get leaving the hospital is about $1.25/day for the TV in your room. That’s it.
The only time you’ll encounter a waiting list is if you’re getting treated for something inconveniencing but not life threatening. When it matters, the care is there when it needs to be.
And when you weigh these minor inconveniences with the fact that no one here ever loses their house, goes bankrupt, or worries about losing their insurance, there is no question the Canadian system is far superior.
Yeah, you pay higher taxes on everything here. But they add up to less than what Americans pay for their health plans. And, there’s no such thing as a preexisting condition, co-pay, annual limit, or any of the other garbage you put up with down there.
In my opinion, the main things preventing real reform in the US are greed, ignorance, and a whole lot of lobbying money.
Why people down there aren’t rioting in the streets IN FAVOR of universal health care honestly dumbfounds me.
Have a great day, eh!
August 28th, 2009 at 11:18 am
Re-working your budget and your debt snowball might be a good idea. If you’re paying extra on the car, mortgage, loan, credit cards, savings, and any other bills (or even any 2 or 3 of those) and now trying to pay off the medical bills, you’re spreading yourself too thin. It could take you decades to do it that way, without seeing anything paid off.
Re-list your bills from smallest to largest. Calculate how much you can spend on the bills, and then figure out how much is left over after paying the minimum on all of them. Let the minimum be $5 per medical bill - and only focus on the ones that aren’t sent to collections. And, send it no matter what. If they don’t accept it, keep the returned check, and then send that $5 either to another bill, or send $10 the next month to the same bill. if they take you to court, the effort on your end to make good on your bills is shown, so the judge will probably just sneer at the creditors. Your list of bills is going to be long, but that’s ok, as you mention that a few of the medical bills are also under $500, so that’s actually good; you’ll see progress more quickly.
Once you have those smaller bills paid off -all that are $500 or less - re-calculate your snowball but include the ones that are in collections now, as you should be able to pay a minimum of $100 or even more by this point to the next one on the list.
Do you have extra in savings over $1000? Take it out, and pay something off or try your best to put it toward a bill. If not, when you hit $1000, use that $20 on something else.
Above all, you have to stop using the credit card (assuming you still use it occasionally). And, other than the top bill on the list, this bill is the only one I’d consider paying $5/month more on, assuming I was close to the limit.
If you can cut even $5 out of the food/supplies, other and the utilities budget categories, that’s an extra $10-15/month that goes toward something. the next month, you might try to decrease it by another $10. Even something as simple as switching to generic or drinking the coffee at the office instead of at home or a coffee shop might do it. Heck, I decreased my laundry down to 1/3 of what I was spending by switching the brand, and decreasing the amount of detergent I used in each load.. Do all the little tricks to get more money whenever you can… and consider some of the more drastic ones listed above like renting out a room (especially good if you have a room above the garage or something!) or selling one of the cars.
Whatever happens, debt consolidation, bankruptcy, getting a HELOC or something on the house to pay off bills just leads to opening up those issues again in the future. If the behavior doesn’t change, it will be the same thing again in the future, but with more money owed.
Good luck!
August 28th, 2009 at 11:21 am
@Christine T. (#37) Its called HMO.
@Kevin (#71)
Yes, but you still have the CHOICE to go “out-of-network” and pay out of your pocket for the procedure you want to have.
I’ve paid out of pocket for the following laundry list of items that haven’t been covered at one time or another by the various HMO and Insurance plans that I’ve had the “priviledge” of being part of… and this is just off the top of my head.
Chiropractic
Acupuncture
Hormonal therapy
Cosmetic therapy (for acne)
Two of these are long term continuing expenses.
Having heard about some of the nightmares that have occurred in other countries with socialized medicine, I’m afraid we WILL NOT have that option with the plans the gov’t are proposing.
@quinsy (#58)
I also realize that those in the medical profession are good people doing the best job they can with a broken system - some of the best discussion I’ve ever read on that subject can be found on Mark Graban’s lean Blog at http://www.leanblog.org.
August 28th, 2009 at 11:26 am
@des: Thanks for the clarification. I was thinking more along the lines of $5 to all, the rest to the smallest, as the percentage method seemed a bit odd to me.. that scenario you listed would have something like 90 cents going to a $100 bill. But, while I did read the part that said you first had to get current, I haven’t gotten to the part about what happens if you aren’t.
August 28th, 2009 at 11:26 am
@ Leah #79 –
Do you purchase toilet paper?
August 28th, 2009 at 11:46 am
Medical collections are easier to get rid of ( as far as removing from credit report) than other types of collections. I recommend reading the medical section at a forum like Creditboards for the process as it related to collections/credit.
As far as actually paying, I consider everything ( especially medical) to be NEGOTIABLE. And since most medical bills are ridiculously inflated and services come with zero transparency and actual fees/costs are hidden, I think there is nothing wrong with settling at a big reduction. If I had $100-150 a month and a bunch of $100-200 bills, I would probably attempt to knock out 2-3 of the smaller bills at a time. Offer something like 50% or $50 on a $100 bill- depending on the current status. I would also ONLY pay the original service provider and not a collector. IMHO, monthly payment plans are usually a waste of time and you give away any leverage you have by giving in and throwing a few bucks here and there. I would either pay in full or lump sum settlement. $50 to get one paid off and done would be a lot better than $5 to 10 different creditors and nothing to show for it. Tackle the small bills and the ones that will settle for the lowest % first. If someone doesn’t want to get paid, pay someone else.
August 28th, 2009 at 11:47 am
We accrued nearly $20k in debt after our twins were born early and I had complications which involved me staying beyond our insurance’s allotted time for childbirth and delivery. Three years later, we are free of this debt. I will not comment on expenses outside of medical, since others have already given good advice.
Although our income is higher than Eila’s, this was still a significant hit for our family of 6. The steps we used–
1. Talk to all your debt owners and let them know you WANT TO PAY THEM (sounds like you have). If they know you are sincere, they should work with you –and hey, they’ve helped save your health/life. so express your gratitude.
2. Pay off the for-profit providers or those you must visit regularly first. Keep them happy.
3. In WA state, non-profit medical centers, which includes most hospitals, will not charge interest. Find out which, if any, of your debts are with non-profits. You can bargain them down to a very comfortable payment plan. For us this was key since the hospital was the biggest expense.
Eila’s medical situation may be chronic since the monthly cost of meds seems very high. I think Wal-Mart pharmacy can do a lot to consolidate the cost of prescriptions. I’ve also seen commercials from pharmaceutical companies that say you can contact them directly if you have trouble affording your meds.
August 28th, 2009 at 11:50 am
Hey, all. I don’t have time to leave a long response, but I did want to let you know that Eila sent a follow-up email to answer some questions. She wants to assure everyone that she’s been reading GRS for two years and follows many of the things we discuss. Here’s what she wrote:
Remember, folks: When we do an “ask the readers”, we’re talking about other members of the GRS community. These are real people who may have struggled in the past, but are doing their best to change for the better. The best way to help is to provide constructive advice about the future, not comment on possible mistakes in the past.
August 28th, 2009 at 11:51 am
@Amy #89 — I thought the exact same thing.
August 28th, 2009 at 11:52 am
I also think from a mental standpoint it is much more helpful to approach this from a positive position of negotiating the debt and paying it off with what you have rather than this whole doomsday ” oh no I better start eating ramen and stop buying paper, maybe get a 2nd job delivery pizzas in a gang-zone so I can scrounge up 2 extra bucks to give some creditor everything I have” nonsense.
August 28th, 2009 at 11:53 am
I do have one suggestion that hasn’t been touched on yet: Ask for help from local charities or social service agencies. Check with your providers, your church, or local government. I am in charge of a fund that gives one-time help to families in a variety of situations, and if this person lived in my city, I would either pay off one of her medical bills or make a partial payment on her mortgage or utilities. Typically we don’t give more than $500, but that can make a big difference in many situations. I would also put her in touch with the Red Cross in our city, which has its own charitable fund. The key here is that this is one-time help that gets someone over the hump without going into a bad debt spiral (lose the car, lose the job, lose the house…). Usually people come to us at the end of that process, but we can do a lot to prevent it from happening.
So Ella should ask around and see if a fund like that exists in her area. And if she feels bad about “taking charity,” she can make a donation to the fund once she gets her finances straightened out. I have had clients do that, and it always makes my day.
August 28th, 2009 at 12:04 pm
@Brigid — Yes, it’s not unreasonable that people need a place to live and a way to earn income that they need a way to get to. When examining a budget, it is an absolutely valid question to ask if the housing situation could be made cheaper or transportation could be found for a lower cost. Considering that these are two of the largest expenses for many people, it’s very possible that they could provide the largest “win”. For example, the house could have been purchased 15 years ago and appreciated quite a bit over time. Selling the house could end the nightmare of debt collection relatively quickly. Same for the car, if there is a way to sell it and buy a decent used model for some amount of money, that can open up possibilities that may not have been looked into.
August 28th, 2009 at 12:08 pm
Medication – Most people have mentioned to try switching to generics but see if you can qualify for reduced/free medications through the manufacturers. If this doesn’t work see if your primary care doc can maybe give you a month of samples every 3 or 4 months.
On the bills themselves, ask for a itemized bill and scrutinize it carefully. Make sure that everything on the bill were services provided to you. Then ask if the cash price for services is perhaps lower than the cost for those insured. I had a MRI bill reduced by $300 when they just billed me directly (I still don’t understand why but Ill take it)
Gas – I feel your pain on this one. I am in CO as well and my husband commutes from Colorado Springs to Denver daily. Try to find a coworker to commute with even if its just for part of the ride (my husband meets a coworker who lives in Castle Rock and they go into Denver from there, switching who drives each week.) Also see if your employer will let you move to a shortened work week (I do 4 ten hour days which saves one day of commuting)
CashFlow – I would everything possible to get this increased for the moment. It will be tough with two kids but it has done before. Maybe one parent does a newspaper route in the morning and another does pizza delivery in the evening. Sell everything that isn’t absolutely essential and dump all the cash into putting together a $1000 emergency fund. Stop buying everything but food, gas, and essentials.
I am a Dave follower like a few on here so I am agreeing with the sell the car, cut food costs, etc. but I know that its all easier said than done.
@JD is there any way we can get Elia to provide some breakdowns on how those monthly bills break down and what the medical bills look like?
August 28th, 2009 at 12:24 pm
Chris (88) - Some of those things you mentioned are not part of the regular Canadian health care. You have to pay for them out of your pocket or with private insurance.
Chiropractic - no.
Acupuncture - no.
Hormonal therapy - this one I’ve never heard of so I’m not sure if it’s covered or not.
Cosmetic therapy (for acne). Not 100% sure but I don’t think this is covered.
Universal health care means that all residents have the same access to basic health care - it doesn’t mean that every medical procedure available is free.
Dental work for example is not covered. Eye exams/glasses are not covered. Drugs are not covered.
Doctor visits (including specialists) are covered, operations are covered, hospital stays are covered although if you want a semi-private or private room then you have to pay extra.
August 28th, 2009 at 12:26 pm
Wow! Sounds like it’s rip up Elia day.
First -folks cars depreciate so she might not even be able to sell the car for what she owes on it.
Second - there is something to be said for having a reliable/sturdy vehicle in the midwest. Especially if someone in your house has medical issues. I’m close ot being in Elia’s boat (emergnecy ate up emergency fund, cc were used after that, etc) & if my car blew up tomorrow & I had to get another I’d take out a loan to get a better vehicle that can stand up to the snow & ice. An as someone who has been in Nebraska for 20+ years, nothing sucks worse then calling in to work because your older car’s engine froze up overnight. And, yes you can go out & start an older car every fours hours but sometimes people fall asleep and stay asleep for more then 4 hours.
Housing is expensive in Colorado - I turned down a job there because of housing costs.
She was asking for help on what to do about the medical - not have people rip her up for buying food & TP. She kept things held together when it was at it’s worst now she’s trying to figure out how to dig out.
Congrats to you Elia for keeping it all together during a trying time! I wish I was close enough to help you out somehow.