How to Handle Medical Debt While Unemployed

Medical debt is at an all-time high in the U.S. If you have medical bills but no job, which means limited financial resources as well as no employer-backed insurance, it may seem like an unsolvable problem.

You’re not alone. By the end of 2024, about 100 million Americans owed more than $220 billion in medical debt, the Consumer Finance Protection Bureau estimated. Nearly a quarter of all households reported having unexpected medical debt in the 12 months before the Federal Reserve’s most recent Economic Well-Being of Households Survey, with the median amount owed $1,000 and $1,999. The average amount of medical debt in collections, which means it’s more than a year unpaid, is $3,040, according to the CFPB.

Though the U.S. unemployment rate by 2025 has been holding steady in the 4%-4.2% range for more than a year, and has dropped steadily following a high 14.8% in April 2020, that doesn’t mean much to you if you’re unemployed and have medical bills you can’t pay.

While it may seem hopeless, there are ways to grapple with medical debt even if you’re unemployed. Some of the options are financial assistance, forgiveness, negotiation, overall debt relief solutions or banruptcy. The solution that’s best for your depends on your financial and personal situation.

Options When You Are Unemployed and in Medical Debt

The impact of medical debt is far-reaching.

“Medical bills are a major financial pain point for Americans, and the fear of cost can be enough to stop some families from even seeking care,” Rohit Chopra, CFPB director from 2021-2025, said. “Medical billing and collection practices have lasting effects on people’s financial, physical, and mental health. Poor medical billing and collection practices can result in patients delaying or declining needed medical care while they struggle to cope with the financial consequences of the debt burden placed upon them.”

Medical debt is a type of unsecured debt, meaning it’s not backed by collateral. For that reason, bankruptcy is often one of the first options that come to mind, but there are other ways to handle medical debt before it gets to that point. The federal government, states, nonprofits, and even the health care and insurance industries have worked to make medical debt less of a burden for consumers in recent years.

Medical Debt Can Be Forgiven or Reduced

The first thing you should do when you get a medical bill is to check it over carefully and make sure there are no errors. More than four in 10 consumers with medical debt say they have received an inaccurate bill, according to the CFPB. Nearly seven in 10 were billed for services that should have been covered by insurance.

Ask your health care provider for an itemized bill (sometimes called a superbill). This bill will show everything that you’ve been charged for using the universal medical billing procedure codes. It also shows what your insurance paid and what you owe. Common mistakes on medical bills are double billing, services not rendered, and coding errors. Catching mistakes can reduce your bill, or even make it go away if you were billed for a service you didn’t get, or something insurance should cover.

If you need help untangling a medical bill, ask your health care provider if they have a billing advocate. Some nonprofits, including your local Veterans Affairs office or Agency on Aging also may provide this service.

The No Surprises Act, which became law in 2022, protects consumers who have medical insurance from getting socked with unexpected high-cost medical bills for out-of-network medical care, another cause of unpaid medical debt. The law provides a process to dispute overcharges for care.

Find Out If You Qualify for Assistance

Nonprofit health care providers are required to offer some form of assistance, sometimes called charity care, to patients who can’t afford medical care because they don’t have insurance, or are underinsured.

Hospitals and health care providers are also required to make their written Financial Assistance (FAP) and Emergency Medical Care policies publicly available and easy to find. If you require hospital care, they’re required to give you a hard copy of their FAP, which should include eligibility requirements, what assistance is offered, how to apply and instructions on how to get a FAP application. The policy must be provided free of charge and you can ask if it’s available in a language other than English.

Steps to take to apply for medical financial assistance, or charity care, are:

Ask for the Financial Assistance Policy (FAP) before you receive care if possible.
Fill out an application form ASAP – it will ask about income and you’ll have to document it with tax forms and/or pay stubs. If you’re unemployed, it will ask you to document that. It will also ask for information about bills like rent or mortgage, utilities and credit cards.
Don’t be afraid to ask questions, including about the timeline, how the bill is paid until you’re approved, and anything else that you’re concerned about.
If your medical bills are in collection, notify the debt collecting agency that you’re seeking financial assistance and ask them to pause collections until there’s a decision.
Follow up. Continue to ask questions, and be sure to follow up on the status of your application.

Look into other forms of assistance as well. Some states require hospitals to provide free or discounted care to patients meeting certain criteria. Depending on the state it may apply to all hospitals, or just nonprofits. Some also have medical assistance laws. If you have unexpected medical bills, check to see what your state offers, particularly if you have lost your job or have had a decline in income.

Nonprofit organizations like the PAN Foundation and CancerCare offer medical bill help, as do many other nonprofits. If you don’t qualify for assistance from the provider, seek out other organizations that can help, some of which provide free financial help for medical debt.

Medical Bill Forgiveness

A medical provider may forgive debt in cases of extreme hardship, which usually involves a life-changing event like a permanent disability, loss of a spouse, or unemployment. Be prepared to supply financial documentation that shows how dire your circumstances are and that there’s no possible way to pay the medical bills.

Negotiate a Medical Debt with a Hospital

If you don’t qualify for assistance, the hospital may still be willing to negotiate a lower bill. Collection agencies buy debt from hospitals for much less than what is owed, and the hospital would rather work with patients.

Typical prices for procedures can be found in Healthcare Bluebook or FAIR Health Consumer, and should be a starting point if you’re being charged more. If you lost your insurance when you lost your job, let the provider know you’re unemployed and ask for the same rate insured patients pay.

Keep in mind that if you work out a payment plan, you’ll be making monthly payments that you may be charged fees or interest for.

The Consumer Financial Protection Bureau has a page with tips on how to negotiate with a debt collector. You can also enlist the help of a professional at a debt settlement firm to help with negotiations. An experienced debt specialist can help you decide on a settlement offer, and they have experience negotiating with creditors. A for-profit debt settlement firm will charge you a fee for this service.

Medical Payment Plans

Many hospitals now offer financing for medical procedures, often administered by a third-party company. It may make it easier to pay the medical bills, but it will still be medical debt and often comes with high fees and interest. Before signing off on one, make sure you’re not eligible for financial assistance instead. Also, be sure you can pay. The third-party companies don’t come under the same rules that nonprofits do and can engage in more aggressive collections practices, the CFBP, which has had increasing complaints about medical financing plans, reports.

Medical Debt in Collections

A provider may hand off your medical debt to a collection agency if you have trouble paying or they may have their own collections department. If your unpaid medical bills go to a collection agency, be prepared for incessant phone calls seeking payment.

About 36% of collections debt reported to credit bureaus is medical debt. The number used to be higher – it was 57% in 2021. But a rule that went into effect that year requires medical debt to be delinquent for a year before it can be reported to a credit bureau. A 2022 law set a $500 minimum on what could be reported, which also cut the amount reported to credit bureaus.

If your medical debt is in collections, make sure that what you’re being hounded for is what you really owe. Ask your provider for an itemized bill and make sure you’re not being asked to pay what was supposed to be covered by insurance, are being billed for a procedure that didn’t happen, or some other error. The CFPB estimates as many as 50% of the medical debt bills in collections may have errors. The Fair Debt Collection Practices Act also requires collectors to adhere to certain rules. The CFPB has a page on what your rights are and how to work with a debt collector.

Filing for Bankruptcy to Pay Off Medical Debt

Medical debt is often cited as a major reason people file for bankruptcy – various studies say it’s responsible for anywhere from 50% to 67% of bankruptcies. It makes sense. Large unexpected bills that aren’t budgeted can be financial crushers. If you’re unemployed with medical debt, it may seem like bankruptcy is the best option.

If you’re considering bankruptcy to help wipe out your medical debt, keep in mind that filing for bankruptcy is expensive and complicated, with a lot of steps, documents and deadlines. The chance of success is much better if you hire an attorney, so you can add that to the cost. While the filing fee is only $338, the average cost of a Chapter 7 bankruptcy is anywhere from $1,500 to $3,000. Those who file Chapter 7 bankruptcy, the most common kind for consumers, have a good chance of success if they file correctly and make it to court, and it’s not converted to Chapter 13. Debts are generally discharged for 95%-99% of those who make it through the filing process to appear before a bankruptcy judge, according to the U.S. Bankruptcy Court.

What Happens if You Don’t Pay Medical Bills

Ignoring medical bills should never be a strategy, even if you’re unemployed. Creditors don’t ignore them, and if they’re not paid a collection agency will handle them in as little as 60 days. Once unpaid medical bills go on your credit report, they’ll bring down your credit score and remain there for seven years. It’s also possible you’d be taken to court and your wages garnished if you don’t pay medical bills.

How Medical Debt Affects Your Credit Score

Unpaid medical debt can lower your credit score by as much as 100 points. For 15% of consumers, it’s the only account on their credit report. In those cases, because there’s no positive credit accounts to offset it, it’s a credit score killer.

Since medical debt is looked at differently than other kinds of debt, there are also some positives when it comes to your credit score. Most people who can’t pay medical bills can’t because it’s a big, unexpected expense that wasn’t in their budget. The credit bureaus, and most creditors, recognize that it’s different from not paying credit card bills or an auto loan.

Credit reporting differences for medical debt compared to other debt include:

It must be a year old before it goes on your credit report, so even if you’re behind, if you pay it off within a year, it won’t affect your credit score.
If it’s less than $500, it won’t go on a credit report.
Once it’s paid, it immediately comes off a credit report.
The most recent FICO scoring method minimizes the impact of medical debt on a credit score, counting it less than traditional debt.

That said, if you don’t pay medical debt, it’ll be on your credit report for seven years, continuing to have a negative affect on your credit score.

Can I Lose My House Because of Unpaid Medical Bills?

A creditor can’t seize someone’s house because of unpaid medical debt, but that doesn’t mean your house isn’t in jeopardy if the debt is large enough. If the debt ends up in court, a judge may place a lien on your house, which has to be paid before a homeowner can refinance or sell the home. A lien will also affect your ability to get a home equity loan or refinance.

Can the Hospital Refuse to Treat Me Because of Unpaid Medical Bills?

If you owe a hospital money, it can refuse you treatment if it’s not an emergency. If it is an emergency, though, federal law prohibits hospitals from refusing treatment to someone who hasn’t paid a previous bill. The Emergency Medical Treatment and Active Labor Act defines a medical emergency as a condition with severe symptoms, including severe pain so acute that the “absence of immediate medical attention could reasonably be expected to result in placing the individual’s health [or the health of an unborn child] in serious jeopardy, serious impairment to bodily functions, or serious dysfunction of bodily organs.”

Should You Use Credit Cards to Pay Medical Bills?

Using a credit cards to pay medical debt or consolidate medical debt, even cards with an introductory low or zero interest rate, can make debt issues worse unless the card balance is paid off quickly.

Credit cards, unlike medical bills, have compounding interest. Bills that aren’t paid back fast compile interest, and the card-holder ends up owing more money. Once the introductory period ends, interest is much higher. Since delinquent credit card debt stays on a credit report for seven years, and medical debt doesn’t once it’s paid off, not paying the card will have a bigger negative long-term effect that the original debt.

Medical credit cards aren’t any different, except for the fact that they are designed exclusively for medical expenses. Even if the medical card advertises no interest on balances, that grace period usual ends in several months and the interest rate charged after that is often high.

Before using a credit card to cover medical debt, find out if you’re eligible for financial assistance, particularly if you’re unemployed. If you’re still going to use a credit card, know what the APR is, when the grace period ends and figure out whether you can pay it off fast.

Consider a Professional Debt Relief Solution

It’s easy to feel overwhelmed by medical bills, particularly if you’re unemployed. If you just can’t find a way to pay them, or other bills, it’s time to consider professional nonprofit debt relief. The National Foundation for Credit Counseling lists agencies that can help consumers with debt.

Nonprofit debt management helps you set affordable monthly debt payment goals based on your current income and expenses. Counselors will work with you to create a monthly budget that includes the debt management payment. If the counselors negotiate with your creditors for a monthly payment, this comes with a small monthly fee.