Can medical bills be cleared through debt resolution?

You can do everything right and still find yourself overwhelmed with hefty medical bills. Medical debt burdens millions of adults in the U.S. What's more, medical debt occurs across all demographics. Regardless of income or lifestyle, anyone can find themselves with expensive doctor, hospital, prescription, or therapy bills to pay. 

The question to ask is, "What's the best way to resolve medical bills?" We'll touch on your options and help you determine whether debt resolution could help you manage your medical debt. 

What is debt resolution?

In a nutshell, when you enroll in a debt resolution program, expert negotiators work with your creditors on your behalf to reduce the amount of money you owe. Reducing your total debt allows you to pay the remainder off faster and put the debt behind you. Debt resolution works for several types of debt—including medical debt: 

• Medical bills for doctor visits, hospital stays, therapy, medication, and medical treatments or procedures

• Credit cards

• Unsecured personal loans

• Some lines of credit

• Some payday loans

• Some private student loans

• Collections or repossessions

Debt resolution can’t help with these kinds of debt:

• Lawsuits

• Utility bills

• Taxes (but there is a special process for negotiating with the IRS)

• Secured debts, like HELOC, auto, and other loans secured by collateral

• Federal student loans

Is a minimum amount of debt required?

The minimum debt required to enter a debt resolution program varies. For example, Achieve Resolution enrolls members with debt amounts between $7,500 and over $100,000. Other programs carry different minimums. 

Let's say you have $5,000 in medical debt and $10,000 in credit card or another type of unsecured debt. Your debt total of $15,000 is high enough to qualify you for many debt resolution programs. 

How much does debt resolution cost? 

Debt resolution fees typically range between 15% and 25% of the debt enrolled. However, rates do vary by program and are impacted by your state of residence. Let's say you enter a debt resolution program with $20,000 in debt. Depending on where you live and the program you choose, you could pay between $3,000 and $5,000 in fees. 

The goal of any reputable debt resolution program is to resolve your debt for less than the amount you owe—and by more than the program fees. For example, if your $20,000 in debt was reduced to $10,000, then even with the fees, the total that you have to repay is less than the full amount of your debt. In addition, most people complete their debt resolution program in 2 to 4 years. That’s typically less time than it would take you to pay down your debt if you were only making minimum payments. 

Before enrolling in a debt resolution program, make sure you understand the associated fees.

How debt resolution works

Dealing with medical issues is enough on its own. When you throw in medical bills that you can’t afford to fully repay, it's easy to see the need to look for debt solutions. With debt resolution, you bring in experts to help with your debt—so you can focus on your health. 

Debt resolution works through these five steps:

1. Free debt evaluation. A certified debt consultant will evaluate your financial situation and design a custom plan to reduce your debt in two to four years. They will ask you about your financial hardship to qualify for the program (such as a medical emergency or large unexpected medical bills).

2. Build up funds for settlements. Once you enter the program, you’ll make one affordable monthly payment into a dedicated program account. The purpose of this account is to build up funds that will be used to negotiate settlements with your creditors. 

3. Negotiations begin. Once you have enough funds in your program account, negotiations begin on your behalf. Expert debt negotiators will contact your creditors to reduce the amount you owe. The more funds you have in your program account, the more leverage they’ll have to negotiate—because they’ll be able to offer to pay a reduced amount immediately if a creditor will agree to accept that amount and consider the debt paid in full.

4. Settlements occur. When the debt negotiator strikes a deal with the creditor, the settlement offer is sent to you for approval. Once you approve, payment is sent directly to the creditor from your program account. The debt is resolved once all payments are made. The debt resolution company’s fee is paid from the same account.

5. The process continues. Let’s say you included 10 debts in your debt resolution program. Expert negotiators work with each of your creditors to settle each debt. Once all your enrolled debts have been resolved, you’ll be free of those debts—and can focus on living your life.

Impact on your credit 

When you’re in a debt resolution program, you may choose to stop making payments to creditors. This signals to your creditors that you are unable to pay your debts and may make them more inclined to settle. Once you stop payments, those accounts show up on your credit report as past due, which will cause your credit score to drop.

As each outstanding debt is resolved, each creditor will report it as such to the credit bureau and the balance will show up as zero. 

Usually, when a creditor reports that you have a zero balance, it also adds a note explaining that the account was settled. The notation remains on your report for up to seven years. During this time, anyone checking your credit report could see that you worked with a debt resolution program at one time.

An account reported as “settled” is better than an open collection account, but not as favorable as “paid as agreed.” 

If you decide debt resolution is the right move, plan to take concrete steps to build your credit score back up once you’ve completed the program—such as by avoiding on new debt and paying all of your bills on time.  

We all go through highs and lows in life. It's natural to view debt as a negative, and it could certainly feel that way. But debt doesn’t have to be permanent. You may not be able to avoid medical care or the expenses that come with it, but you could take control of how to manage medical debt so that it is not an added burden to your health.