Dear Liz: I am 63 and retired from my full-time job last year since I have bad health. I work part time now and have tons of medical bills because of stage one cancer. I need additional cash. Is there some way I can get an advance using my pension check as collateral? In addition, is there any way to get an advance from those insurance people who pay people who may die in less than five years? I can’t say when I’m going to kick the bucket but any suggestions you may have that will allow me to get some immediate financial assistance will be greatly appreciated.
Answer: Let’s reinforce what you just said: You don’t know when you’re going to die. A stage one cancer diagnosis is far from an immediate death sentence. You could live for decades, so the mistakes you make now could haunt you for a long time.
Yes, there are some companies that will give you a lump sum in exchange for the next five to 10 years of your pension payments. You should avoid them like the plague. The effective interest rates they charge can be astronomical and you’ll probably be much worse off. If you’re having a hard time making ends meet now, losing a source of income won’t help.
Even if you were going to die soon, no one would hand you money just because of that fact. Those “insurance people” are actually investors who buy cash-value life insurance policies, often from the terminally ill. If you had such a policy, you might be able to sell it for an amount somewhere between the surrender value (what you’d get from the insurer by cashing it in now) and the face value (the dollar amount for which you’re insured). These transactions are called life insurance settlements. If you did have such a policy, though, you probably would be better off just borrowing the amount you need from its cash value.
Consider consulting an experienced bankruptcy attorney if you have more bills than you can pay. Medical bills, along with credit card balances and other consumer debt, can be erased in a Chapter 7 bankruptcy filing. Once the debt is gone, you can start rebuilding your finances for what may be a longer life than you expect.
Whatever this person does about their financial situation, they SHOULD NOT charge their medical bills to a credit card. Doing so removes any incentive for doctors and hospitals to negotiate the cost of medical care. Most hospitals have payment plans for patients who can’t pay, and doctors may, too, or at least agree to accept assignment (the insurance amount as full payment).
Credit cards compound the problem with crushing interest rates. Resist the sometimes extreme pressure of billing managers (I have experienced this myself) to pay medical bills with a credit card.
Besides, I don’t want my credit card company knowing I am being treated for cancer or some other serious illness. Who knows where that information goes, and whether it will cause some financial or other repercussions?