Treat bankruptcy as a last resort when paying off large medical bills

Large medical bills can be overwhelming, and many consumers feel that when their health expenses begin to pile up, bankruptcy is the only available option. In fact, according to a study conducted by NerdWallet in 2013, an estimated 56 million Americans under the age of 65 had trouble paying medical bills. Of this incredibly high number, the source noted that approximately 1.7 million lived in households that would declare bankruptcy due to an inability to pay back these high costs.

"In 2013 over 20 percent of American adults are struggling to pay their medical bills, and three in five bankruptcies will be due to medical bills," said Christina LaMontagne, vice president of health at NerdWallet. "While we are quick to blame debt on poor savings and bad spending habits, our study emphasizes the burden of health costs causing widespread indebtedness. Medical bills can completely overwhelm a family when illness strikes."

"An estimated 56 million Americans have trouble paying down their medical bills."

These figures don't only represent those who don't have insurance. Many insured Americans also experience this type of debt accrual regarding medical expenses. As LaMontagne noted, "Insurance is no silver bullet. Even with insurance coverage, we expect 10 million Americans will face bills they are unable to pay."

If you are in a similar situation, it is important to know that you aren't alone. And while it is true that bankruptcy can help you eliminate a great deal of your debt, it can also hurt your credit score and put you in another financial situation that you want to avoid, one of rebuilding your credit.

Take a deep breath when it comes to high medical bills, assess your financial situation and treat bankruptcy as a last resort.

Don't damage your credit further
Medical bills are an expense that many people don't see coming, which makes it difficult to plan for. While an emergency fund should be in place to help you out of a bind when you need it, most Americans don't have enough saved for these expenses.

When your medical bills start to come in, you need to establish a plan right away for paying them back. Don't look at the total number, assume it's more than you can handle and turn to bankruptcy right away. Instead, budget your way through the debt.

When you fall behind on your medical expenses, you are creating a bigger problem for yourself. According to The Henry J. Kaiser Family Foundation, medical debt is a significant concern when it comes to damaging a credit score. And because medical debt tends to be large, it can take a long time to rebuild credit after it has been damaged. This can mean years in some instances.

There are alternatives to bankruptcy when it comes to medical bills.Medical bills can pile up quickly.

Take action immediately
According to Fox Business, medical bankruptcy can be a hit to your credit that could last up to 10 years. This may seem startling to you, but the truth is the effects from medical debt will strike your financial standing right away. Because of this, it is important to wait, but to take action right away.

Bankruptcy should be treated as a last resort so you can keep your credit report healthy, but this doesn't mean you should wait to take any action. The first thing you should do when you receive your bill is try to negotiate a repayment strategy with the hospital or physician's office. Fox Business also recommended reaching out to federal and state entities for assistance, in addition to coming up with creative avenues for raising money.

Additionally, medical debt usually comes in waves, not in one swoop. Specifically, it is usually not the case that one bill will put you into debt, but an ongoing condition or medical problem. Don't wait until all of your bills have been sent to you and your total has been added up. Instead, start implementing a repayment plan right away to tackle your medical debt.

Sometimes it is unavoidable, but you still have options
Bankruptcy exists to assist those who cannot repay their debt, and you should not eliminate the idea completely. While it should absolutely remain a last resort, it might be your only option if your debt continues to grow out of control and you are unable to pay it back. For example, skimping on medication or doctor's visits to avoid going into debt will only hurt you in a long run. Attend to your health so that whatever is the problem can be eliminated. And then, if your financial situation is dire and bankruptcy is your only option, speak with a professional about the best way to approach it.

You should know that bankruptcy is going to harm your credit score, but rebuilding is absolutely a realistic possibility. Additionally, if you are going to move forward with bankruptcy, make sure all of your medical debt is accrued. If you have more health expenses to incur along the way, wait until they are all finalized before filing for bankruptcy.

For more information about how bankruptcy can damage your credit score, check out this video. Remember, you always have options when it comes to repairing your credit and staying in control. Don't let the fear of high medical bills drive you to damaging your credit even more.