A recent study of more than 4 million anonymous credit reports found that 16 percent of them had listings for medical bills that were in collections. More than 2 percent of adults had medical debts of less than $200 that were submitted to collections companies. Furthermore, over half of the medical collections for the year studied, 2016, were for amounts less than $600. The study shows how medical collections are hurting people's credit in California and across the United States.
When debtors in California choose to approach a bankruptcy court, most of them have likely gone through a prolonged period of financial hardship. A report from the Notre Dame Law Review called this period of stress and deprivation "the sweatbox." Drawing upon long-term data from the Consumer Bankruptcy Project, the report identified a category of bankruptcy filers known as long strugglers. Between 2013 and 2016, 66 percent of the debtors surveyed by the organization struggled to repay debts for two years or more even when it meant forgoing food or medical care.
California residents and others who have poor marks on their credit reports may panic at the sight of them. However, it is important to know that they will almost all go away after seven years. The only exception is a Chapter 7 bankruptcy that falls off a credit report after a decade. If a person does file for bankruptcy, the impact is usually greatest for the first two years after filing before leveling off and declining afterward.
Many factors, from medical emergencies to job loss, could cause people in California to go into debt and fall behind on paying bills. Although many debtors struggle onward with the intention of catching up on their payments, they might benefit more from a bankruptcy filing, especially if their financial situations have little prospect of improving. Filing for bankruptcy could let people temporarily forgo payments on credit cards and medical bills so that they can purchase groceries and gas while the court addresses their cases.
Falling behind on your bills is stressful enough, but when debt collectors start aggressively contacting you, it can be a nightmare. Like many in this situation, you may reach the point where you are afraid to answer your phone, reluctant to leave the house and worried that others will find out how bad your situation has become.