Paying down medical debt- need answers!

Avatar for incognito_mosquito
iVillage Member
Registered: 03-28-2003
Paying down medical debt- need answers!
6
Sun, 03-12-2006 - 11:41pm

I spent the last nine years with spotty employment history due to a disability. In that time I racked up alot of debt, mostly medical bills but also some bills I was unable to pay while not working. Thankfully I am now stable on a new medication and have been steadily employed for the last year, though I don't make a whole lot, and I'm a single mom. I am now in the process of trying to rebuild my credit.

I have two student loan accounts, one of which is in good standing and one which I am behind in my payments on. I have been paying that plus extra every month, and expect to have that account in good standing in about a year and a half or less. I have also been slowly paying off collection agencies. I currently owe just over 8000$ to seven different collection agencies. I figure I can afford to pay at least 100$ a month right now towards that. Maybe a little more. So my question is: would it be better for my credit score to send a little bit in to each one each month, or pay them off one or two at a time? Either way I figure it will take me about 4 years to pay it off. Once I get my student loan back in good standing I can shift the extra I've been paying them each month into these collection agencies instead. Also, once my collection accounts are paid off, about how long will it take before my credit score reflects that? TIA.

iVillage Member
Registered: 06-09-2004
Mon, 03-13-2006 - 8:45am

Hi! Welcome to the board.

OK this is what I would do...

For the student loan in good standing, put it on forbearance for economic hardship. If this is a government loan (ie. stafford, perkins, consolidation), this is your right. That's the beauty of student loans.

For the one that is not in good standing, is it in collections or are you just behind on payments to the actual lender? If you are still working with the original lender, I would call them up and see if they can work with you. Tell them your plans for your repayment and have them make that your repayment schedule. They will probably have some sort of payment plan that fits that bill. And while I know this is late, you should know for future reference that you can limit your repayment amount to a certain percentage of your income (I think it is something like 5% of your take home... not sure but you can look on finaid.com and find out). Here is a link about repaying on a dafaulted student loan:
http://www.finaid.org/loans/default.phtml

Re: your other bills. I would not ignore any of them. I would snowball them if you can and pay the highest interest bill first. Pay the minimum payments to all the others and send as much as possible to that highest interest loan. If you ignore them, you run the chance of the collection agencies taking even more drastic actions like going for judgements and whatnot.

HTH!






cl-tiffany10605

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iVillage Member
Registered: 03-17-2003
Mon, 03-13-2006 - 9:25am

Welcome to the board incognito_mosquito.

Your question is: "Also, once my collection accounts are paid off, about how long will it take before my credit score reflects that?"

At the rate you are proceeding on paying down the debt, it would be another 11 years (the 4 years you estimate to pay off the collections accounts and another 7 years for the last activity to no longer appear on your credit history) before the derog entries would stop hitting your history and credit scores.

Until that time your debt-to-credit ratio on the old "bad" debts are paid off will be problematic. And the accounts will always be reported as "charged off" which is a major hit on your history and credit score.

Your employment history, due to health, will also be problematic.

It's not to say you are doomed. Most people have credit histories that show they went through a rough patch.

It is, however, important to understand your concern is about creditworthiness and how you will be perceived by the credit industry. The credit industry is merciless on those who have accounts that lapsed into collections. It means the original debt was charged off and sold to a collection agency, who you are now paying (and I hope you negotiated a lesser amount than the full amount. The CA only paid a few dollars when they bought your account.). So that means your credit report shows two negatives for the original debt: the original debt and the CA who bought that debt.

We have had some informative posts about credit and the rather "unfair" way those in debt are treated by the credit industry, options to dealing with debt and what those options translate to by the credit world.

Glad the years of working through your health difficulties are behind you and stay very far behind you!

Hope this helps.

Carolyn

Avatar for incognito_mosquito
iVillage Member
Registered: 03-28-2003
Mon, 03-13-2006 - 2:44pm

Well, for my student loan that is in default, it's through the State of Alaska, and they are alot less flexible. I have already done everything that can be done to reduce my monthly payments through them. They will only allow it for a limited time and then after that your only option is to make the full payments each month. They won't defer it at all unless you are going to school full time. My payments are about 2,500$ behind right now, and I'm paying an extra 100$ a month at least to get it caught back up. Any large sums I get also go into it, like my tax refund (I already sent them 1,500 this year from that) and they will garnish my Alaska Permanent Fund Dividends until it is brought current also (it's been about 800$ a year for the last few years). Since I work on flat commission my income can vary alot, so certain times of the year I can afford to send more, but I can at least afford to send 100$ over the regular payment each month for now.

As for my accounts in collections, since I have moved about a half a dozen times since the last of them went into collections I am no longer in contact with these companies. A few places were sending notices to my parent's house so I was getting those, and those were the ones I paid off first. They were all for small amounts. Under 150$. All I did was start sending them money each month, and each month I'd get a new bill reflecting the payment and new amount owed. Some were low enough I just paid them all at one time. I am now getting to where I only have a month or two left of payments on those, so I looked up my credit reports to get info on my other debts. All I have is addresses, account numbers, and how much I currently owe. I have no idea how much interest is being charged, but it doesn't look like a whole lot because it's been at least four years since I've made any payments to any of them, and much longer for others, and the amounts haven't gone up very much at all. The amounts of the debts vary from about 600$ to 1,500$ each. I have also had one judgement against me, but since I have no assets nothing was ever siezed, and I haven't had any wages garnished either. I'm guessing I should go ahead and start making payment on the judgement first?

After that, what should I do? Should I write the collection agencies and suggest a minimum payment? If I am sending money to each of them each month I will only be able to afford to send 15 to 20$ to each of them for the time being. Do you think they would go for it? They haven't seen hide nor hair of me in four or five years.

iVillage Member
Registered: 06-09-2004
Thu, 03-16-2006 - 6:52am

Hm. Well... I guess the big question here is what is your ultimate goal? Do you want to pay back what you owe or do you want to clean up your credit? One doesn't preclude the other, but you have various options depending on what you really one.

That said, there are certain instance in which it can be better for your credit report to actually do nothing. This article explains this option:
http://moneycentral.msn.com/content/SavingandDebt/P59862.asp

From what I know about collections agencies, they are more than likely to demand payment in full if you contact them. Not only that, but they will re-start your 7 year clock.

Are you planning on taking out any loans any time soon (mainly car or mortgage)? Have you purchased your credit score?






cl-tiffany10605

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cl-tiffany10605


Avatar for incognito_mosquito
iVillage Member
Registered: 03-28-2003
Fri, 03-17-2006 - 12:10am

I couldn't get that link to work.

I'm not taking out any loans any time soon but I'd like to have the option in the future. If I do nothing won't it stay on my credit forever?

iVillage Member
Registered: 03-24-2004
Sun, 03-19-2006 - 11:41pm

Hello there and welcome to the board.

Weird as it may sound, NO it won't stay on your report forever. Actually if you do nothing at all it will be off in about 3 years having dropped off from lack of interest. Negatives only last 7 years. Since you said that you haven't been in touch with these people for about 4 years they have really written you off as a bad debt that they took a chance and bought.... but now realize that they can't find oyu and don't wan tot waste any more good money going after bad.

Now, my suggestion is to not contact ANY of them until you have both the student loans completely paid off. If it were me, I would pick the first one you want to pay off...save about 2/3rd of the money owed to them, then contact them and offer a settlement for 1/2 what you owe them. They will counter and you might be able to settle for 2/3 what you owe. Send the money only with the agreement that they give you proof in writing that you are paid in full and it will be reported on all 3 agencies that way.

Then go for the next one. In the mean time DO NOT CONTACT ANY OF THEM. What Tiffany was trying to tell you was right. If you contact these people they will immediately start to hound you and they will re-age your accounts as if the bill started yesterday. They will start harrassing you, calling you at work, sending notices, and demanding money and/or getting garnishments. Then they WILL be on your report for ever!

Now, that's all if you choose to pay them all back what you owe them. Bankrupcty is another option that you could discuess with a lawyer. You seem to be making money so If you filed Chapter 13, you would still pay them back but only a portion and you would be protected from ever hearing from these people ever again.

Third, is what Tiffany suggested and that' just sit tight for the next 3 or so years...especaiolly if you don't have anything to qualify for during that time and pay off your student loans and then let the other stuff slide off your report. It will disappear and although someone could come back (something bankruptcy prevents)and find you later, I've known people who's bad accounts just slid off and they were left with only the good stuff.

Right now the companies have no idea where you are. They just figure they bought a bad, uncollectable loan. Please realize that if you contact them before you have all the cash in hand to pay them off, you will stir up a hornets nest so feirce it will over power you. They have NO interest in you making payments. They will not allow that. They will want their money right now, all of it, right NOW.

sweetpea

sweetpea