Many people have medical debt. Nine percent of adults — about 23 million people — owe a medical debt of $250 or more, according to the Peterson-KFF Health System Tracker. About 1% of adults owe more than $10,000, and those bills represent most of the medical debt in the U.S.
Medical debt may not go away when you die.
Let’s see what happens to medical debt after death.
who handles medical debt after someone dies?
The decedent’s medical debt is paid from a person’s estate, if the estate has sufficient assets. An estate with enough assets to pay off any or all debts is considered “solvent.” If an estate does not have enough assets to pay debts, it is considered “insolvent.”
Survivors are not responsible for the medical debt, in most cases. but survivors may be responsible for medical bills after someone dies if:
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a surviving spouse who lives in a state where marital property is jointly owned by the spouses under law. these states are known as community property states.
a co-signer who guaranteed a debt to the deceased person
a parent or spouse who lives in a state with laws that hold them responsible for certain costs, like medical care
an executor, administrator of the estate, or other person representing the estate
what type of medical debt could be the responsibility of the survivors?
An estate manager is responsible for paying the debts of the assets of a solvent estate. If an estate is not solvent (or insolvent), creditors often cancel or forgive the debt.
Survivors may still be held personally liable for certain health care debts of the decedent. those situations include:
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Co-Signed Medical Bills – A person seeking medical treatment typically signs documents assuming responsibility for costs as a self-paying patient or if the health insurance plan does not pay . If someone else signed those papers for a person who later died, the person who signed could be responsible for the medical bills.
filial responsibility: more than half of the us. States have laws that require children to provide financial support to parents who cannot pay their bills under certain circumstances. These laws often involve medical debt, such as nursing home costs. Often these laws are not enforced, or a situation does not meet all the criteria for a child to have to pay a parent’s medical debt.
Medicaid Estate Recovery: If someone receiving Medicaid is age 55 or older when they die, a federal law requires state Medicaid programs to recover payments from the deceased person’s estate. the state program may seek to recover all payments made for the deceased person’s nursing home care, home and community-based services, and related prescription drug and hospital services. If the deceased person has a spouse, a child under the age of 21, or a blind or disabled child of any age, Medicaid cannot apply for reimbursement. States must also have a process for foregoing recovery when doing so would create undue hardship, such as impoverishment of the spouse.
Community Property Estates – Spouses are generally responsible for each other’s debts in community property estates. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (In Alaska, spouses can choose whether or not to consider community property.) Laws vary, so you may want to consult an attorney about how living in a particular community property state affects your liability for a deceased spouse’s medical debt.
How are survivors informed of a deceased person’s medical debt?
Often, debt collectors will send bills to the deceased person’s address. they can call the phone number of the deceased person. they may also try to contact a spouse, heirs to an estate, or other survivors.
If the deceased person has a will, a process will be carried out to liquidate the inheritance. that process will include the payment of debts. Debt collectors will often find out about a death because of an obituary or probate, a legal process that occurs after someone dies. Succession has several functions, including ensuring that assets are distributed to beneficiaries and creditors. Life insurance or retirement accounts contain assets that go directly to the beneficiaries and are protected from being used to settle the estate.
Often, an executor or other survivor will notify creditors of the death. we’ll talk about that in the next section.
How are creditors notified of a death?
In most cases, an executor, administrator of the estate, or survivor of the decedent will need to notify creditors of the death. that is usually done by sending a written notice and including a copy of the death certificate. once the creditor receives this information, they can share the information with the three major consumer credit reporting agencies.
You can also submit a notification with a copy of the death certificate directly to one of the three consumer reporting agencies. they are:
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equifax
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transunion
The credit reporting agency that receives the death report will share the information with the other two.
If you are the surviving spouse, you must also include a copy of your identification. If you are not the surviving spouse, you must include court documents showing that you are authorized to act on behalf of the decedent, as well as a copy of your identification.
united states the social security administration also notifies credit reporting agencies about deaths of people who have social security numbers. Credit bureaus flag the credit reports of the deceased to help prevent fraudulent activity such as identity theft.
can you negotiate the medical bills of someone who has died?
it’s worth a try.
Sometimes smaller medical debts are canceled or forgiven when a person dies. But don’t be surprised if creditors seek payment for higher medical bills.
You may be able to negotiate charges for medical bills after the death of a loved one. call the medical provider to propose a settlement offer to be paid all at once or through a payment plan. Usually, a settlement offer is less than the amount owed and forgives additional fees. let the creditor know that the person who received the services is deceased, and they may be more willing to work with you.
Negotiating charges may be more difficult if the debt was sold to a collection agency, but your settlement offer may still be accepted, especially if you can pay a discounted amount all at once.
Does taking on the overall debt of a deceased person affect your credit?
usually not. Surviving family members are generally not responsible for a deceased person’s bills, including medical debt.
A spouse or relative may become liable for the decedent’s debt in these circumstances:
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medical debt – If you signed papers authorizing medical treatment for someone who has since passed away, you may be on the lookout for that bill. we’ll talk specifically about medical debt in the next section.
Joint Debts with a Spouse – These generally include mortgages, car loans, and lines of credit. A joint credit card or medical credit account would also be included. a credit card in the name of the deceased spouse is usually not included. People who are authorized credit card users are also not responsible for debts on those accounts.
Cosigned Debt: If you signed for a deceased person to qualify for a credit card, car loan, or other debt, you become responsible for that account.
Inherited Home Equity Loan: If you are the heir to a home that has an unpaid home equity loan or line of credit, you will be responsible for that debt.
timeshares: If you inherit a timeshare, you are now responsible for any associated appraisals or maintenance fees.
what should you do if you cannot pay the medical debt that has been transferred to you?
If you inherited or incurred a medical debt from a deceased loved one, contact the creditor. make sure that you, and not the estate, are responsible for the debt. If the medical debt still resides with a provider, you may be able to qualify for a financial assistance program. As mentioned above, you can also try negotiating a discounted amount to pay all at once or through a payment plan.
Also, please review all invoices carefully to ensure they are accurate. check for duplicate and unreasonable charges.
If you’ve exhausted all options, filing for medical bills could help you pay off or reorganize debt.
what happens if you ignore the medical debt assigned to you?
Medical debt can be overwhelming, but ignoring the bills won’t make it go away.
Creditors can be aggressive in pursuing a deceased person’s medical debt. if you are responsible for those bills, you may be contacted.
If the debt resides with a provider, the hospital billing office may send you an email or begin contacting you by phone. If the medical debt has been assigned to a collection agency, you may be contacted for payment, or the debt collector may file a lawsuit to obtain payment. the debt could eventually show up on your credit report and affect your credit score.
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