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.
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My husband and I are in the same situation. We have over 20 different medical bills that total over $5000. We can only afford to pay $50/month towards medical bills. My husband was out on unpaid medical leave for 8 months. We were totally unprepared for this unexpected event. No savings and ended up maxing out several credit cards during the eight month period. It has been two years later, and we are still trying to recover from our unpreparedness. I agree that it doesn’t do a bit of good to berate for someone on how they got in to debt, but encourage them and give them sound advice in their journey to get out of debt and correct past mistakes.
Because we only have $50 to spare towards medical bills, I ordered them lowest balance to highest balance. I take that $50 and put towards the first until it’s paid off and then move on to the 2nd. Granted, those with higher balances do not get their money as quickly. They have encouraged us to put on our credit cards (NOT!!!) and have sent us to collections. They will eventually get their money, but it’s going to have to be on our time.
Our number one lesson learned in this situation is that you have to be prepared for the emergencies. Everyone needs an emergency fund. End of story.
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Some people have given the advice I would give and that is looking for a small loan to pay the total and then to pay off the loan in smaller amount.
My other recommendation is to look into CareCredit. It is like a medical credit card that is easy to get approved for and they will give you time to pay off your balance before charging interest. I believe Capital One has a version of this too. Medical expenses will happen and this way you won’t get slammed with a ton of little bills again.
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While I agree with the above posters, I’d like to point out that expenses are highly regionally specific. As a single parent making under 25,000 I haven’t got the slightest idea why anyone carrying a debt at all would be choose to be tied down with a car payment, but that really isn’t my point.
Point: Costs depend on area. I live in Seattle, where those numbers are, for the most part, well below average. For example, my two bedroom apartment waaaaay outside the city is considered a “steal” by people in my own income range (and below) at $900 a month. I can’t imagine trying to house 4 people. It may be that they live in a populated area, where EVERYTHING costs more.
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