How to deal with a big hospital bill when jobless, uninsured – Los Angeles Times

Dear Liz: Because of COVID, my 27-year-old son lost his job and health insurance. He was unable to afford continued health insurance and did not qualify for Medicaid. He contracted spinal meningitis and was hospitalized 12 days. The hospital reduced his bill to $28,000 from the original $80,000, but he is still unable to pay. He remains unemployed and without any savings. What would you suggest he do?

Answer: Your son should first call the hospital and ask about applying for financial assistance. Federal law requires nonprofit hospitals to offer this help to low-income patients, and many for-profit hospitals also offer programs that can reduce or even eliminate the charges.

He also should ask about a payment plan geared to whats left of his income. He should resist any hospital pressure to put the bill on a credit card, because hospital payment plans typically dont charge interest while credit cards do.

If hes still left with a bill he cant pay, he should consult a bankruptcy attorney, and do so as soon as possible. Bankruptcy experts are predicting a big uptick in filings as people and businesses struggle with fallout from the pandemic.

Dear Liz: Should we take out a home equity loan so we can do some improvements on our house and make it work better for us, or should we sell it and upgrade to a bigger house? We are not in a rush to move, so we are content to take our time to find the right new home at the right price. We are also considering staying and doing work on our current home. But we have a lot of equity and are wondering: Would it be smarter to cash that in? We both remember the housing crash and are very nervous about getting in over our heads.

Answer: People are spending a lot of time at home these days, and many are longing for a little extra space. Interest rates are low, which makes borrowing for improvements or a bigger home more affordable for many.

Youre smart to be cautious about taking on too much debt, though. Lenders are much more cautious than they were before the Great Recession of 2007 to 2009, but its still possible to borrow more than you can comfortably repay. Big mortgage payments could prevent you from saving for important goals such as retirement or your childrens college education.

If you like your current neighborhood, remodeling is often the more economical route. You spend roughly 10% of your homes value when you sell it and buy another. Real estate commissions take a big chunk, as do moving costs. Bigger houses whether through remodeling or moving also can mean higher tax, insurance and utility bills. Thats not to say you should never upgrade, but youre smart to consider all your options because the cost of exchanging homes is pretty high.

By the way, you arent really cashing in equity when you use it to buy another home or borrow against it to make improvements. Some people would say thats putting your equity to work, but the idea that equity needs employment is what led many people to borrow excessively against their homes before the last recession. Its perfectly fine, and often desirable, to have lots of equity just sitting around. That way, its there for you when you really need it. You can tap it in an emergency, for example, or to help fund your retirement.

Dear Liz: Im considering converting an old 401(k) to a Roth IRA. Will the gains from the 401(k) account be treated as capital gains? And can you only convert 401(k) plans you no longer participate in, or can you convert both current and former 401(k) plans?

Answer: Youll pay income taxes on the conversion. Retirement plans, including 401(k)s and IRAs, dont qualify for capital gains tax rates. You may be able to convert your current 401(k) as well. Ask your plan administrator if in plan Roth conversions are allowed.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the Contact form at asklizweston.com.

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How to deal with a big hospital bill when jobless, uninsured - Los Angeles Times