What to do with tax return?

[8 Ears]

As usual DH and myself are at odds with each other over our finances! We decided YOU get to decide which we pay off. However, it does not look like we will be able to pay both off.

Let me first say if you are going to be judgemental than please close out of this thread now without posting.

Last year was VERY tough financially for us. In short we have a credit card that is in collections and about $3,000.00 worth of medical bills. Some as low as $20.00 with the higest being just under $2,000.00
These medical bills are in collections as well.

So our question is which would be better to pay off? All of the medical bills or the credit card? Not sure if we will be able to pay it in full or not.

What looks worse on our credit report? Several medical bills or 1 credit card?

Thank you for your advice without being judgemental

 

[Toby'sFriend]

So you have $3000 in medical bills
and
$3000 on a credit card

and they are all in collections?

and you think your refund will be about $3000?

Once you get your refund in your bank account start dealing. Call each one and tell them you have cash in hand and if they will accept 1/2 of their total bill as payment in full of the account, they will have their money order by the end of the week. If they say they can't accept the deal, tell them, ok then I'll move down to the next creditor on my list and see if they'll accept. Many, if not most of them will accept.

After you do all that, see who is left and start paying them -- getting as many as you can paid off completely. Kill one at a time, don't leave a whole bunch of them 1/2 dead because they'll all just spring back to life.

Get every deal in writing before you send the money, and keep all the paperwork.

That's my vote.

 

[RNMOM]

Wow, you are sure trusting.

First, most hospitals will negotiate monthly payments and not put you into collections if you do this early. I don't know if you can still do this but you might try speaking with the billing offices and negotiate monthly payments you can afford. Also ask them to check if you are elgible for any of their discounts or programs through the state/county, etc.

I would pay off the credit card, completely. I agree with what the above poster suggested about calling and negotiating payoffs but then I would get rid of all that first. Medical debt is able to be written off your taxes unlike the credit card. Money you spend out of pocket can be deducted if it exceedes 7.5% of your gross adjusted income. This along with home mortgage/taxes are just about all we can deduct these days.

So, I would get rid of the consumer debt and negotiate also with the medical providers for monthly payments.

Do not use your credit card again. If you can't pay for it each month, you shouldn't buy it. That is the motto we live by and have for the past 11 years. I get very nervous if I have to exceed my rule for any unseen problems....

 

[Rootskate]

Another vote here for paying off the credit card.

 

[Golf4food]

A combination of the two PP's is probably your best course - see who will take a smaller payment (starting with the credit cards first) and payoff as much of the CC debt as you can since you can deduct the medical expenses if they exceed that 7.5% amount.

 

[Princess April]

I totally vote for the credit cards.... Be sure to call first and get the best deal that you can. I bet they will be willing to bargin to get any $$$$$. Also, cudos to you for being so responsable with your tax return, I know many many people in your situation that would go out and "blow" it on "stuff"!!!!

 

[problemchild718]

Ok, If you don't have an emergency fund, put at least $500.00 in the bank. Then call the cc comp. and tell them you would like to make things right, but don't have enough for the entire due-they will probably write off a good bit of the total (they should at least remove late fees and over the limit fees)I wouldn't let them know I had more than $1500. I would then use whatever was left to pay as my of the medical bills and get on a repayment plan with the others. (as long as you make regular payments-even $10 month, there isnt much they can do to you)
I too would say to not use the cc again unless you can pay it in full monthly. Continue to add to the emergency fund even $10 will add up.
You'll get into a better place-just hang in there.

 

[MissMichelle]

I'm not sure which would be the better to pay off, but I want to say good luck and I hope you can get them all resolved quickly and move past it. I know how much debt stinks.

 

[8 Ears]

Thank you for the advice about not useing the CC if you can not pay it off every month. Here is more of the back ground of the last year...

*In September our 15 year old fell over 30 feet. He spent a week in the hospital, due to his injuries I got done work in order to take care of him. Without therapy that was over $30,000.00! Yes we have insurance but it does not pay for gas, meals, we spent a fortune on ice, frozen vegies, ice packs. Then all the prescriptions once he was out.

*In October DH and myself were in an auto accident.

*In November our other son broke his toes.

No we were not set up like we should of been, but so is life. 15 year old is still going to therapy twice a week, and every time we walk in to a specialist the co pay is $40.00. May not sound like much but when you go every couple of weeks for this or that it adds up.

We are not pleased with ourselves to be in this situation but do not want to just step aside either. We have paid some of the medical bills, and yes I set up monthly payments on some of them but I did it for what I thought we could afford BUT more come in every week.

Anyway, thanks for listening and for the advice.

 

[keishashadow]

Life happens , least you're recognizant of the problem and trying to solve it other than walk away.

have you looked into the many free debt management programs where they negotiate with your creditors?

I'd offer the CC company 1/3 to start out, they may settle.

as for the medical bills, typically; as long as you negotiate a payment schedule they won't turn you in for unpaid. Not sure if you had insurance or not; if not...did you try & ask for a reduced bill ala what the insurance companies pay?

lastly, while it's very unpopular with the sages; since saving money is an issue...why not try & decrease a deduction on your taxes or have an extra $100/month withheld. Even if only for a year, it would give you a windfall to bank ($1,200) to have as an emergency fund.

good luck

 

[keishashadow]

Thank you for the advice about not useing the CC if you can not pay it off every month. Here is more of the back ground of the last year...

*In September our 15 year old fell over 30 feet. He spent a week in the hospital, due to his injuries I got done work in order to take care of him. Without therapy that was over $30,000.00! Yes we have insurance but it does not pay for gas, meals, we spent a fortune on ice, frozen vegies, ice packs. Then all the prescriptions once he was out.

*In October DH and myself were in an auto accident.

*In November our other son broke his toes.

No we were not set up like we should of been, but so is life. 15 year old is still going to therapy twice a week, and every time we walk in to a specialist the co pay is $40.00. May not sound like much but when you go every couple of weeks for this or that it adds up.

We are not pleased with ourselves to be in this situation but do not want to just step aside either. We have paid some of the medical bills, and yes I set up monthly payments on some of them but I did it for what I thought we could afford BUT more come in every week.

Anyway, thanks for listening and for the advice.

did you check into itemizing the medical expenses on your return?

 

[Cheshire Figment]

I would suggest going to www.creditboards.com and looking at some of their discussion forums and other stuff. They deal with this sort of stuff over there all the time and can give real good advice.

 

[minnie1928]

did you check into itemizing the medical expenses on your return?

Great idea, but just to add...I believe you can only itemize the pieces you actually paid, not incurred. I think you've got some great advice from the others above but I wanted to wish you some , sounds like you've had a horrible 2007.

 

[BeckyScott]

No judgement here. Been there, still doing that.

I would agree to take part of it to save as an emergency fund, and $500 sounds reasonable.

Are all you medical collections at the same collection agency? That might make a difference, too. You can't negotiate as well if everything is at one agency.

I'd call everybody, the collections and the credit cards both, and tell 'em you've got somewhere between 1/3 and 1/2 of what you owe and you can send it out that very day. See what they tell you. If they balk on it, tell them that's okay, you owe plenty of other people money, and that you guess you'll just pay those people instead, thank you very much. Call everyone and get their best deal, get the person's name you talked to so you can call them back, then figure out which one is most willing to work with you.

As far as your credit rating, they both look bad. Sometimes, in some situations, people will overlook the medical debt just for the reasons you've explained. But most the time it won't matter.

 

[minnie1928]

As far as your credit rating, they both look bad. Sometimes, in some situations, people will overlook the medical debt just for the reasons you've explained. But most the time it won't matter.

Am I dreaming or can't you ask to have a note inserted into your credit report for situations like this? I don't know if it would help...but it couldn't hurt, could it?

 

[lovemygoofy]

If you do decide to settle your debt without paying the full amount be aware that next year you will have to declare I think anything over 500 or 600 as income on your taxes.

ETA: Have you looked into some kind of prescription card that the pharmacutical companies particpate in? I don't know if you are still paying for alot of prescriptions but if so, you may be eligible for a limited amount of time.

 

[Caleb's Mom]

No advice, just hugs to you and your family --- it sounds like you had a very tough year.

 

[sarahlovesmickey]

I also vote for the credit cards. Good luck to yoU!!!

 

[dopeyfanatic]

Another one for the credit card. Call and offer to settle...they will probably be willing to settle for 50% if you're already in collections. I had to do that also. Good luck with everything!

 

[iwannago!!]

Sorry to hear about your trials this year, may 2008 be a better year for you all!

I would most definitely take care of that credit card. Give them a call and let them know that you intend to pay it off (assuming that you will have the $ to do so). Ask them kindly if they would waive the late fees/over limit fees that have been charged so that you CAN pay it off. Those fees would have been charged over and over and over again over several months prior to going into collections. They will negotiate with you and waive the fees if they can take a check for payment from you over the phone - and ask them to waive that fee as well.

IF you don't have enough to clear that debt completely, do the above, but let them know that you have $xxxx dollars to pay them, ask them to waive xy&z charges & set up a payment agreement for the rest.

Medical bills - those don't charge interest and 'somehow' won't affect you adversly (or as adversly) when applying for credit/ or on a credit report. UNLESS something has changed, it was something that I learned years back working for a mortgage company. See about writing those off on your taxes though, as another poster(s) suggested.

Physical Therapy - THOSE guys get a LOT of $$$ from your insurance per visit. ASK them if they would waive the copay for you for son to continue his visits... explain that you just can't do it anymore and if they cannot, then you are going to have to discontinue the visits. IME, they would rather keep son as a patient for the $ that insurance pays less the copay than they would want to lose the patient/insurance claim. At the least, request that they considerably lower the copay... $5/visit kinda thing, a token.

good luck in whatever you do!