Unpaid Medical Bills, Unpaid Bills, & Credit Card Default: What Next?

Posted by Alesha Struthers Mar 17, 2021

If you are struggling because of unpaid medical bills, other unpaid bills such as an unpaid water bill, and credit card default, you're not alone. In 2019, CNBC reported an academic study conducted that revealed over 66.5% of bankruptcies occur because of a medical event. A family is either impacted by the unexpected costs of medical care or because they were unable to work or continue to be unable to work.

When you have unpaid medical bills or unpaid bills of any kind (including an unpaid credit card that goes into default), it becomes a civil matter. This only means that the matter is not criminal. If the creditor or a collection agency sues you to either get a default judgment (if you do not show up) or a civil court judgment, you will owe the creditor or collection agency money and it will be reported on your credit report, but it is not a criminal matter.

Although it isn't a criminal matter, this does not mean that it isn't a stressful or serious matter. Medical bills, credit card debt, and other unpaid bills can be extremely stressful to address because they impact your life now and they can affect your future.

In this article, you'll learn more about unpaid medical bills, what happens when you default on a credit card, civil court judgments, and what you can do about these issues. The content in this article should not be taken as legal advice. It is for educational and informational purposes only. If you have questions about how any of this information may apply to you, schedule a free consultation with The Law Offices of Alesha Struthers now!

What Happens When You Default on a Credit Card?

When you default on a credit card, there are a couple of main things that happen. Depending on the terms of the credit card agreement, your interest rate may change. For example, if you recently received the credit card and had a 0% APR for a certain amount of time, your interest rate may change to 29% or more. Additionally, depending on how far behind you are on your payments, the credit card company may close your account. They may also charge a late fee for every payment that you've missed.

At some point, they may either assign your account to a collections department either within their department or they may outsource this. They may choose to sell the credit card debt to a debt-buying company as well.

Once the credit card default occurs, it may be reported to the credit bureaus and show up on your credit report. This will impact your credit scores across all three credit bureaus. Even if you pay it off, a slow pay may still remain which could have a negative impact.

The credit card company could decide to sue you to obtain a civil court judgment or default judgment against you as well if you haven't entered into and adhered to a payment plan.

According to Bankruptcy By the Numbers, a report released by the Department of Justice, most Chapter 7 bankruptcies include a high amount of credit card debt.

Do Medical Bills Affect Your Credit?

Despite one-third of Americans struggling with medical bills, the fact is medical bills do affect your credit. They are considered a line of credit. It is an unfortunate reality considering it only takes one unexpected illness or injury to negatively impact your credit for years.

When you're looking to buy a car or take out certain types of loans, there are some creditors who are more lenient than others when considering medical bills. However, there is no absolute way of knowing whether a lender will be forgiving toward any situation involving medical debt since they really have no idea whether a person just didn't want to pay or couldn't pay.

Additionally, if you are sued for medical bills, any default judgment or civil judgment against you will also appear on your credit report. Even if a garnishment is issued against you and it is satisfied, it will continue to appear on your credit report. This information is a red flag for prospective lenders because they worry about whether you will pay. It may not matter to them that it had to do with medical debt related to an illness or injury you could not predict.

Can You Go to Jail for Unpaid Medical Bills?  

No, you cannot go to jail because of unpaid medical bills. In fact, debt collectors, collection agencies, and creditors cannot threaten you with jail time, either. That is against federal law. You can learn more about your rights when dealing with debt collectors and debt collection calls by reading this blog post.

Can You File Bankruptcy on Medical Bills?

Yes, you can file bankruptcy on medical bills. However, you aren't only filing bankruptcy on medical bills. There is no such thing as just a medical bankruptcy. When you file bankruptcy, it is on all of your consumer debts. For example, that would be unpaid medical bills, unpaid bills such as an unpaid water bill or another unpaid utility bill that caused a disconnection, a credit card that you defaulted on, unpaid personal loans, the balance of car repossession, etc. All of your debts are listed (although some, such as child support and certain types of taxes, are not dischargeable).

If you have certain debts that are active that you want to keep, such as your car payment, you may have the option to reaffirm (or keep) the debt with the court's approval. A Chapter 7 bankruptcy can be very beneficial in helping anyone who has unpaid medical bills get a new financial start. To learn more about whether Chapter 7 may be helpful for you, schedule a free consultation with The Law Offices of Alesha Struthers now!

What Is a Civil Court Judgment?  

A civil court judgment is a decision handed down by a judge in a civil court. If you are sued by a creditor over unpaid medical bills or because of a credit card default, it would be heard in civil court because it is not a criminal matter. If you did not appear in court, the creditor or collection agency would receive a default judgment. A default judgment is a type of civil court judgment. If you appear in court, the creditor or collection agency would present evidence and you would both get the opportunity to speak. The judge may also give you both the chance to try to work something out, such as a payment plan. However, a civil court judgment could still be entered against you.

If a civil court judgment is entered against you, you will owe money to the creditor or collection agency. The amount you pay may include interest and attorney fees for the other party. Additionally, it can appear on your credit report. It can take seven years for the civil court judgment to be removed from your credit report even if you pay it off.

Can Civil Court Judgments Be Included in Bankruptcy?

A civil court judgment related to unpaid medical bills, other unpaid bills, and credit card defaults can usually be included in bankruptcy and discharged. However, it is very important to get the advice of an experienced Chapter 7 bankruptcy attorney so that you better understand how bankruptcy law will affect your civil court judgments. To schedule your free consultation with The Law Offices of Alesha Struthers, click here now!

Disclaimer: This publication is not legal advice. It is intended as legal information only. For legal advice specific to your needs, contact the Law Offices of Alesha Struthers, PS at 800-972-0411.

Posted March 2021