Dear Quentin,

My wife passed away after an extended hospital stay. She had absolutely no assets, but our home is in both our names. Am I responsible for her medical debt? Can they take our house? (We have no health insurance.)

Left Behind

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Dear Left Behind,

I’m sorry that you lost your wife after such a long stay in the hospital. 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, have no health insurance.

What happens with her medical debt will depend on your state and, to a lesser degree, your negotiation skills. Medical bills are a peculiar beast: Unpaid medical bills only affect your credit score if they are over $500, and U.S. states take various approaches to whether such bills are shared between spouses.

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

Homestead exemption

Almost all states, however, have a homestead exemption, which protects some equity in a debtor’s home from being seized by creditors. “The amount of homestead exemption available to debtors varies from state to state, ranging from just $5,000 to the entire value of the home,” the Commonwealth Fund states.

“Seven states have unlimited homestead exemptions, allowing debtors to fully shield their primary homes from creditors,” it says. “Additionally, Louisiana offers an unlimited homestead exemption for certain uninsured, low-income patients with at least $10,000 in medical bills.”

It adds: “Eleven states prohibit or set limits on liens or foreclosures for medical debt. For example, New York and Maryland fully prohibit both liens and foreclosures because of medical debt, while California and New Mexico only prohibit them for certain low-income populations.”

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When a person dies, their medical debt is paid by the estate, which may come out of your pocket, too. “In essence, you may not have to directly pay for your spouse’s medical bills, but you can still be affected by them,” says the Artemis Family Law Group in Orlando, Fla.

“Many people are under the impression that they will not have to pay for their spouse’s medical bills by simply refusing to sign any documents that would make them a responsible party to the medical bills,” it adds. “However, this is not a complete shield in every case.”

What if the medical bill was paid using a joint credit card? “The credit-card company would not care that you did not sign off as being a responsible party. The credit-card company will most likely hold you and the spouse incurring the medical bills jointly liable for the debt,” it adds.

To make things more complicated: In community-property states such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, assets and debts incurred during the marriage are generally regarded as marital property (although laws vary).

No. 1 cause of bankruptcy

Medical debt is the No. 1 cause of bankruptcy in the U.S., with some studies putting it at anywhere between 45% and 60% of total filings, despite the fact that nearly half of the U.S. population has employer-sponsored health insurance.

I point this out in order to cast some light on your wife’s situation. You may benefit from contacting the National Foundation for Credit Counseling, a nonprofit financial-counseling organization.

Millions of Americans are either one paycheck away from losing their home or one medical crisis away from bankruptcy. More than 500,000 families go bankrupt each year due to medical reasons, according to one estimate. It’s a big problem.

A study in the American Journal of Public Health concluded that bankruptcy is most common among middle-class Americans, who shoulder increasing copayments and deductibles despite the Obama-era Affordable Care Act.

Lower-income Americans “less frequently seek formal bankruptcy relief because they have few assets — such as a home — to protect and face particular difficulty in securing the legal help needed to navigate formal bankruptcy proceedings,” the researchers found.

Negotiating a debt

As for negotiating a debt, Equifax has some tips. “When dealing with a collection agency, start your negotiations low. Start by offering cents on every dollar you owe, say around 20 to 25 cents, then 50 cents on every dollar, then 75,” it says.

“Before fulfilling any payment agreement you negotiate with a debt collector, make sure you get the terms in writing,” the credit bureau adds. “Then, after your debt is paid off, request a written confirmation that you have settled your debt.”

Your question is a short one, but the answer is complicated. Depending on the size of the debt, it may be worth consulting an attorney to help you. As I said, you can always negotiate. You may not be successful, but it’s definitely worth a shot.

More columns from Quentin Fottrell:

‘He has never paid rent or utilities:’ Do I have the legal and moral authority to charge my brother 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 sibling wants 15% ownership. What now?

‘I have zero regrets’: I’m 84 and estranged from my two adult sons. My 48-year-old wife will get my seven-figure estate. Is that selfish?

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