“We Don’t Have Health Insurance”: My Wife Passed Away, Leaving Behind Huge Medical Debts. Am I Responsible for Her Debts?

By Quentin Fottrell

“Can we have our house taken away?”

Dear Quentin,

My wife passed away after an extended hospital stay. She had absolutely no assets, but our house is in both our names. Am I responsible for her medical debt? Can they foreclose on our house? (We don’t have health insurance.)

Left behind

Related: ‘I Don’t Want to Be Unfair’: My Mom Gave Me $150,000 to Buy a House. One of My Siblings Wants 15%. Now What?

Dear Left Behind,

I am sorry that you lost your wife after such a long hospital stay. Having this debt hanging over you only makes a traumatic situation worse. You and your wife are not alone in being uninsured; approximately 26 million Americans, or 7.7% of the population, do not have health insurance.

What happens with your medical debt will depend on your state and, to a lesser extent, your negotiating skills. Medical bills are a special beast: Unpaid medical bills only affect your credit score if they’re over $500, and states take different approaches to whether those bills are split between spouses.

“Most states (33) do not prevent hospitals, collection agencies or debt buyers from placing a lien on or foreclosing on a patient’s home to collect unpaid medical bills,” according to the Commonwealth Fund, a private U.S. foundation focused on the health care system.

Homestead Exemption

However, nearly every state has a homestead exemption, which protects a portion of the debtor’s home equity from seizure by creditors. “The amount of homestead exemption debtors can receive varies from state to state, ranging from as little as $5,000 to the entire value of the home,” the Commonwealth Fund says.

“Seven states have unlimited homestead exemptions, which allow debtors to fully shield their primary residence from creditors,” the report said. “In addition, Louisiana offers an unlimited homestead exemption to certain uninsured and low-income patients with at least $10,000 in medical bills.”

She adds: “Eleven states prohibit or limit liens or foreclosures for medical debt. For example, New York and Maryland prohibit liens and foreclosures for medical debt entirely, while California and New Mexico prohibit them only for certain low-income populations.”

When someone dies, their medical debts are paid by the estate, and you may be on the hook for them as well. “In essence, you may not have to pay your spouse’s medical bills directly, but you can still be affected by them,” says Artemis Family Law Group in Orlando, Florida.

Medical debts are paid by the estate, and can also be taken out of your pocket.

“Many people believe they will not have to pay their spouse’s medical bills by simply refusing to sign any documents that would make them responsible for medical bills,” the report adds. “However, this does not provide complete protection in all cases.”

What if the medical bill was paid with a joint credit card? “The credit card company wouldn’t care if you didn’t identify yourself as the responsible party. The credit card company would likely hold you and your spouse jointly liable for the debt,” he adds.

To complicate matters further: In states with community property laws, such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, property and debts incurred during the marriage are generally considered marital property (although laws vary).

First cause of bankruptcy

Medical debt is the leading cause of bankruptcy in the United States, with some studies estimating it to be between 45 and 60 percent of all filings, despite the fact that nearly half of the American population has employer-sponsored health insurance.

I am bringing this to your attention to shed some light on your wife’s situation. It might be helpful to contact the National Foundation for Credit Counseling, a non-profit financial counseling organization.

Millions of Americans are one paycheck away from losing their home or one medical problem away from going bankrupt. By one estimate, more than 500,000 families file for bankruptcy each year for medical reasons. That’s a big problem.

A study published in the American Journal of Public Health found that bankruptcy is more common among middle-class Americans, who face increasingly high co-payments and deductibles despite the Obama-era Affordable Care Act.

Low-income Americans “are less likely to seek formal bankruptcy proceedings because they have few assets – such as a home – to protect and face particular difficulties in obtaining the legal help needed to navigate formal bankruptcy proceedings,” the researchers found.

Negotiating a debt

When it comes to negotiating debt, Equifax offers some advice. “When dealing with a collection agency, start your negotiations at a low level. Start by offering a few cents on every dollar you owe, say about 20 to 25 cents, then 50 cents on every dollar, then 75 cents,” she says.

“Before you complete any payment agreement you negotiate with a debt collector, be sure to get the terms in writing,” the credit bureau adds. “Then, once your debt is paid off, ask for written confirmation that you have settled your debt.”

Your question is short, but the answer is complicated. Depending on the amount of debt, it may be worth consulting a lawyer to help you. As I said, you can always negotiate. You may not succeed, but it is definitely worth a try.

The Moneyist regrets that it cannot respond to letters individually.

Other columns by Quentin Fottrell:

“He never paid rent or charges: “Do I have the legal and moral authority to ask my brother for rent to live in our family home?”

“I don’t want to be unfair”: My mother gave me $150,000 to buy a house. One of my siblings wants to own 15%. Now what?

“I have no regrets”: I am 84 and separated from my two adult sons. My wife of 48 years will inherit my seven-figure estate. Is this selfish?

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-Quentin Fottrell

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