Handling Debt During Illness

Call each creditor before you fall behind, or as soon as you do. Explain that you are being treated for a serious illness and that your income has changed. Ask directly about hardship programs, which may include lower minimum payments, a short payment pause, reduced interest rates or waived late fees. Some lenders ask for a letter from your doctor or proof of lost income. Write down who you spoke with, the date and the terms offered, then ask for the agreement in writing. Start with debts tied to things you cannot afford to lose, such as your home, car and utilities.

When money is tight, protect the basics before anything else. That usually means rent or mortgage, utilities, food, transportation to treatment and the insurance premiums that keep your coverage in place. Unsecured debts, such as credit cards and many medical bills, often have more flexible options and can wait while you arrange help. Avoid putting large medical bills on credit cards or taking high-interest loans before asking about hospital financial assistance and payment plans. A nonprofit credit counseling agency can help you build a realistic budget and may contact creditors on your behalf at little or no cost.

Keep every letter, statement and agreement in one folder. If a debt collector contacts you, federal law gives you rights, including the right to ask for written verification of the debt and to dispute it. Never ignore court papers, because missing a deadline can lead to a judgment and wage or bank garnishment. Rules about how medical debt appears on credit reports have changed in recent years, so review your credit reports for errors and dispute anything inaccurate. Be wary of debt relief companies that charge large upfront fees or promise to make debts disappear quickly.

1. 1

   Call each creditor, explain your illness and ask what hardship or payment pause options exist.

2. 2

   List your bills and pay housing, utilities and insurance premiums before unsecured debts.

3. 3

   Ask for written confirmation of every changed payment arrangement and keep it on file.

4. 4

   Contact a nonprofit credit counseling agency for free help building a budget and talking with creditors.