Clear-your-medical-debt-with-a-debt-consolidation-help

Can you pay your medical debts with the help of debt consolidation?

In today’s time each one of us is worried about health-related matters and perhaps this is the reason why people take out a loan for medical treatment of themselves and the loved ones. In the process of doing so, many fall into huge medical debt from which recovery becomes a bit difficult. So don’t you wish to discover how debt consolidation helps in paying off huge medical debt? Worry not because we have the answers to all your queries.

What is medical debt consolidation? How does it help to pay off medical bills?

As you may know, that debt consolidation is a way to pay off your debt. In this method, you can consolidate all your multiple debts into a single monthly payment. This process can really help people when they face with serious or extended medical issues which can result in big multiple bills.

Here you will find ways to achieve debt relief by consolidating and paying off medical bills.

4 Ways to consolidate your medical bills

Medical debt consolidation is easy and there are several ways to approach it.

Here are the options you can look for:

  1. Low APR credit card – One way to cover best medical consolidation debts is to repay hospital debt with a low APR credit card. Several credit card companies offer promotional rates ranging from 0% to 3.99% for a span of 6-21 months. Once that period reaches the expiry date, the card’s APR will go up.
  2. Personal loan – In a personal loan, the user can consolidate medical bills along with high-interest credit card debt and can make one payment to a single lender at a lower interest rate. It is useful to the applicant as it can also be obtained very quickly. The other advantage is that you know what monthly payments you need to make and for how long.
  3. Home equity loan – This kind of loan is secured by the equity you have in the home, which is equal to the difference between your property’s value and what is still owed on the mortgage. In comparison with a personal loan, home equity loans have lump sums with fixed interest rates. The cash can be used to repay your medical debt.
  4. 401(k) loanThere are employer-sponsored retirement plans which allow users to borrow cash to pay debts. It is essential to follow a set of the application process to avoid early withdrawal penalties, and you can borrow a maximum of $50,000 or half of your balance, whichever is lower. Also, you are required to pay whatever you borrow along with the interest within five years.

Effect of consolidation on tax implications

As you consolidate medical bills, you may be charged with tax implications. This can give your the opportunity to reduce your tax bill. If your insurance plan is highly-deductible, then plan on building an HSA (Health Savings Account) by depositing a certain amount into a pre tax account. This can be useful for health care expenses at any point in time. The unused amount is carried forward into the future years. If you have enough income then it is better to put the annual maximum individual or family amount into this HSA fund. This amount will be subtracted from the gross income so that you will not have to pay any taxes.

Sounds good… right?

Other ways to pay off medical debts

Not only you can consolidate debts but there are also other simple ways to pay the medical debts and become financially liberated. Here are a few options:

1. Work on getting the lowest medical bills

Ensure that you do some research before negotiating to lower the medical bills. Negotiating with your healthcare provider to lower bills or extended payment plans can be really helpful in lowering bills. Look for payment support options, such as Medicaid, Children’s Health Insurance Program, and local medical help. You can also buy medicines at a subsidized rate which can reduce the amount generated in the medical bill.

2. Opt for an income-driven hardship plan

If you are stuck in a situation where you have low income and high medical bills, you can be eligible for an income-driven hardship plan.

Under the income-driven hardship plan, the sum total is broken into a more manageable amount so that you can pay the regular amount. In this process, you may also be able to reduce the amount you owe. Communicate with your provider to see if any such plan is offered. Before becoming eligible, you can also try applying for Medicaid that could be a useful aid to lower the medical payment.

3. Negotiate for a payment plan

Many medical providers, which include physicians, dentists, and hospitals, can chalk out an affordable payment plan for your bills. This is one of the easiest and most popular ways to resolve a bill you can’t afford in one payment.

In the payment plan, the total cost is broken into multiple equal payments for a period of over a few months. You can also request for bill receipts and other fees related to the payment package so that it is easy to track the amount.

4. Review your medical bills

Have you thought of examining your medical documents?

If no, then it’s time to carefully review all the documents to ensure that you have a brief knowledge of the bills and that they have been arranged properly. Advocates of America have observed that around 80% of bills contain errors, which can make the task difficult and can also give rise to the problems occurring while creating the total report.

If you are looking for the highest possible insurance reimbursement, then it’s better to choose in-network doctors and hospitals. You can also get the benefit of comparing the prices and also learn a lot while you work with the providers, there are chances that you will get more affordable monthly payments over a longer period of time. If you are willing to pay in full cash, providers may also reduce your total bill expenditure.

5. Get help from a credit counselor

One of the common tools for debt payment is the debt management plan which includes medical, credit card, and other unsecured debt. The debt management plans are usually offered by credit counseling agencies, who negotiate interest rates and fees with creditors on your behalf. They also decide upon a monthly payment, which you need to make to the agency, and then the amount is distributed among those you owe.

The debt management plans are mostly offered by nonprofit credit counseling agencies who are adept at negotiating deals for the benefit of the consumer. They try to lower interest rates and fees and also consolidate the monthly payments which are distributed among those you owe.

Additional Tip: You can also check online and read about various organizations that help pay medical bills to lower the debt burden of the consumers. It is also good if you are combining medical bills so that it is easier to evaluate the total amount in the future.

6. Pay attention to the tax effects

As you consolidate medical bills, you may be charged with tax implications. This can give your the opportunity to reduce your tax bill. If your insurance plan is highly-deductible, then plan on building an HSA (Health Savings Account) by depositing a certain amount into a pre tax account. This can be useful for health care expenses at any point in time. The unused amount is carried forward into the future years. If you have enough income then it is better to put the annual maximum individual or family amount into this HSA fund. This amount will be subtracted from the gross income so that you will not have to pay any taxes.

Sounds good… right?

Conclusion

When you are struggling to deal with medical debt, it’s important to be proactive. The sooner, the better. At least, you have to be alert and figure out what all options are available for getting the financial help. This will simplify your life and your financial life will be set on track. Use the best medical debt consolidation option to increase the chances of paying your medical debts.

Can-debt-consolidation-help-you-to-stop-wage-garnishment

Can debt consolidation help you to stop wage garnishment?

Wage garnishment is a legal process conducted by creditors to collect unpaid debts. Practically, a garnishment is applied to the unpaid accounts that are at least six months old. Creditors usually prefer this legal process if the debtor fails to initiate a repayment agreement.

Wage garnishment will require a court order or judgment to be initiated, except some cases where federal debt is involved. After getting a judgment from the court, your employer might get an order to cut off a specific amount from your paycheck and give it to your creditor to satisfy the debt.

In 2013, a popular human resource management company named “ADP” analyzed the payroll data of US employees and found some amazing facts. The report revealed that 7.2% of the employees had their wages garnished that year. It is also revealed that 40% of these garnishment cases include child support and 20% cases are for federal unpaid taxes.

Federal law has strict rules on how much creditors can take away from your paycheck as garnishment.

The wage garnishment amount is limited to 25% of one’s disposable income (after deductions) or a certain amount by which your weekly wages exceed 30 times the federal hourly minimum wage, whichever is lower.

Some states have lower wage garnishment amount limit than the limit provided by the federal law.

Money sources that can be considered as income apart from your regular paycheck:

  • > Social Security benefits
  • > Spousal support or child support
  • > Supplemental Security Income (SSI)
  • > Welfare or public assistance
  • > Veterans benefits and/or loans
  • > Public or private pensions
  • > Cash surrender value of life insurance policies
  • > Disability proceeds of life insurance policies

Types of wage garnishments

Practically, your wages may be garnished to serve two main categories:

1. To pay judgments for unpaid debts.

2. To pay administrative orders. Typically it’s for paying specific debts such as student loans, spousal or child support, or back taxes.

  1. a. Wage garnishments for paying off judgments

    A creditor might garnish your wages if you lose a lawsuit and a money judgment is entered against your unpaid debts.

    First, the creditor should file a lawsuit against you with the court along with proper documents.

    Later, the court may order your employer to hold a part of your paycheck and give it to the creditor to pay off your debt.

    Your employer should notify you about the garnishment when he starts withholding a part of your wages. After providing the garnished money to your creditor, the employer should also inform you about how you can protest the garnishment.

  2. b. Wage garnishments to pay off administrative liabilities

    In some special cases, a creditor might garnish your wages without obtaining a judgment. This is typically known as the administrative wage garnishments. Through an administrative wage garnishment, the creditor may collect debts such as spousal and child support, student loans, and back taxes.

    The court may garnish your wages up to 50% of your disposable income for paying child support. But that may only happen when you are already providing financial support to a child or spouse.

    Up to 60% if the disposable income may be taken from you if you aren’t supporting anyone else. If you are in arrears for more than 12 weeks, an additional 5% may also be taken from you.

    As per the Debt Collection Improvement Act of 1996, the U.S. Department of Education may garnish your wages up to 10% from your paycheck if you do not pay off your federal student loan debt on time. There’s no lawsuit or court order required to garnish your wages in this case, as it’s a federal debt. Whenever you are in default, you’ll face wage garnishment.

    If you owe money to the IRS, they will straightaway garnish your wages and cut off a chunk from your disposable income. It doesn’t require a court order to initiate the process. In this case, the IRS will send you a Notice of Demand for Payment, and a final notice after that. The notice will give you 30 days to make repayments. If you do not make the payments within those 30 days, then the IRS may contact your employer to begin the garnishment.

    State and local tax agencies may also have the authority to cut off apart from your wages. However, in many states, the federal law limits the amount.

    In 4 U.S. states, Texas, Pennsylvania, North Carolina, and South Carolina, federal laws don’t allow creditors to garnish wages at all.

    But there are exceptions. Wage garnishment is allowed for child support, federal student loans, tax-related debts, and court-ordered fines or restitution..

How to prevent wage garnishment

You can prevent wage garnishment if you can take control of your finances properly. Here are the best ways to do so:

  • a. Negotiate your payment terms

    Negotiate the payment terms with your creditor. Also, make sure that the creditor gets the first payment within 30 days after the garnishment notice was sent.

  • b. Create a budget

    If you want to stay out of financial trouble, you must create a decent budget and stick to it. You must consider all income sources and all expenses each month. By this way, you will be able to manage your monthly expenses such as mortgage payments, utility bills, credit card debt payments, medical bills, and many more.

  • c. Initiate automatic payments

    You may set up automatic payments each month to make monthly debt payments. This is the best way of paying off your bills every month without fail. On time payments will help you to lower your debt burden and gives you a chance of maintaining your budget properly.

  • d. Build an emergency fund

    Save from your paycheck and from other income sources to create an emergency fund. Don’t depend on your credit cards; it’ll make you fall into a debt trap. Try to generate an emergency fund that is equal to your 3 – 6 months paycheck.

Would consolidating debts help you to stop wage garnishment?

You can opt for debt consolidation option if you want to stop wage garnishment or want to avoid it.

While using the debt consolidation option, you can take out a new loan and use the amount to pay off your existing debts, such as credit card debts, medical bills, utility bills, payday loans debts, etc. After paying off the credit card debts in full, you can close some of the accounts. You can even pay off the debt which is going through a wage garnishment. By taking out a debt consolidation loan, you can reset the old debts with a new lower interest rate loan.

Before finalizing the debt consolidation loan, you must ask your creditor to provide you with a written confirmation on the exact amount that will cover up the judgment issued.

Once you’ve paid the amount, the creditor should contact the court to inform that the judgment is satisfied. The creditor must also inform your employer the same and request him to cease the wage garnishment. You should get a copy of the confirmation from the creditor and send it to your employer and the court.

It may take several weeks to get approved for a debt consolidation loan. It’ll take more time to repay your debts with the creditors and inform the court. So, during that time your wage garnishment won’t be stopped.

You may, of course, claim any wages that were garnished after you paid off the creditor.

A debt consolidation loan cannot be used to transfer or pay off certain types of debts like child support, back taxes, and federal student loans.

However, you can use a debt consolidation loan to pay off your creditor and stop wage garnishment. Debt consolidation process itself can’t stop court-ordered wage garnishment at all.

You can take out loans from different money sources which can be considered as income.