If you’ve ever known what it felt like to rob Mary to pay Peter and Paul when it came to your medical bills, you’re one of roughly $1.5 million people who experts predict will file bankruptcy by year-end — in part due to medical debt.

How bad is it? In July 2009, the American Bankruptcy Institute (ABI) reported that consumer bankruptcy filings reached 675,351 nationwide during the first 6 months of 2009. This was a 36.5 percent increase from the year before. In June, overall consumer filings were 116,365, up by 40.6 percent from June 2008. The ABI cited "unemployment, foreclosure rates and high health care costs” as reasons.

A national study by Harvard and Ohio University, published in The American Journal of Medicine, showed that the leading cause of bankruptcy in the United States is due to unpaid medical bills. The study found that the average balance for outstanding medical-related debt was nearly $12,000 for those who filed for bankruptcy in 2007. Medical bills were also at the core of 50 percent of bankruptcy filings. Even more alarming is that 68 percent of consumers who filed bankruptcy had health insurance.

"I see consumers drain themselves to death trying to pay off medical expenses and then file bankruptcy when they literally have nothing left," says Carmen Dellutri, a consumer bankruptcy attorney in Fort Meyers, Fla. "Filing bankruptcy is the worse thing you can do, and if the consumer had contacted me before the downward spiral got to that point, it could’ve been avoided. Bankruptcy should always be a last resort."

Answer the phone

Many Americans are only a few paychecks away from financial ruin if they couldn’t work due to illness or disability. But there are a number of strategies you can employ to keep a bankruptcy filing at bay.

Barbara Kimberlin-Murphy is a 28-year veteran of the medical debt collection industry and author of Secrets Revealed by a Medical Collector, The Patient’s Guide to Avoiding Bankruptcy.

In every instance, Kimberlin-Murphy believes that medical bankruptcy could have been avoided if the patient had simply talked to the medical collector who was trying to resolve the debt.

"There’s this fear factor out there that a medical collector would never accept what someone could possibly afford to pay when it comes to paying off a medical debt," she says. "This is simply not true. Everything is negotiable."

While the number of people who are uninsured is staggering, they do not make up the highest percentage of people who find themselves in medical bankruptcy. Kimberlin-Murphy says that people with health insurance made up 85 percent of her caseload.

Not everyone has the resources to file for bankruptcy. Families USA, a nonprofit consumer advocacy group, reports that because bankruptcy filings must be handled by a lawyer, many people with serious medical debt do not consider this a realistic option.

Make a plan

If you're dealing with mounting medical bills, here are some strategies to consider:

1. Don’t ignore your medical bills. The problem will not simply go away. Open your mail and make an appointment with those to whom you owe money, advises Kimberlin-Murphy. "Billing clerks at hospitals are mostly women and we are very compassionate. We will work with anyone who will talk to us and not blow us off." Once a hospital sends the unpaid debt to a collection agency, it already knows it stands to lose much of the payment.

"We would rather wait forever for you to pay off your debt instead of losing 50 percent of that debt to a collection agency," she says.

2. Communicate with your doctor or the hospital. Contact the attending physician or the hospital’s billing department by letter or in person. Be honest about your current financial situation and — outside of asking for total financial forgiveness — see if they can cut down your bill to something more affordable. If you make a monthly payment of at least $5 on each medical account, there are instances where you can be legally protected and your wages will not be garnished or a lien put on your property, according to Kimberlin-Murphy.

"Once a judge in district court sees that you have made a good-faith effort to pay your debt, it is very possible the judge may cancel out the entire debt," she says. "It used to happen all the time when I worked in collections."

Kimberlin-Murphy says that this often happens in district court. When someone is sued nonpayment of medical bills, the judge will often rule in their favor if they can show they’ve made an attempt to pay debts off.

Dellutri says that there are legal protections but they can’t necessarily keep you from going to court.

"Now you have doctors who don’t wait to get paid. They turn account receivables over in a month to the collection agency and then it hits the credit report and the spiral begins," he says.

3. Use a hospital or medical provider with ties to a church-affiliated hospital. According to Kimberlin-Murphy, hospitals that are affiliated with the Roman Catholic Church are the most financially forgiving. "I have seen numerous cases where debt was completely written off by Catholic hospitals due to a patient’s serious financial hardship," she says.

4. Find powerful allies for health insurance claims. If you have unpaid medical bills that you believe should be covered by your employer’s group health insurance, you need to know who holds the purse strings.

Your first ally is the benefits administrator in your human resources department at work.

"Every company has one," says Kimberlin-Murphy. "They will go to battle for their employee when it comes to dealing with the insurance company. Group health insurers make a lot of money off of the companies that purchase their policies and insurers want to make employers happy so they will continue to bring business to them. If an employer encounters a lot of problems with a particular insurer, they will change insurance companies."

If you have an individual health insurance plan you purchased on your own, your ally is your health insurance agent.

"Folks with individual health plans need to have an insurance broker," says Kimberlin-Murphy. "If they don’t, they might as well tell the insurance company to do whatever they want to them."

"When I worked in insurance I saw the power of the insurance broker. One phone call on behalf of the policyholder and the situation was usually cleared up in a matter of an hour. Nonpayment of premiums [by the patient] is the only situation that a broker cannot fix," she says.

5. If your health insurer sends you an unaffordable renewal rate, contact your state's insurance department.

Since co-pays, deductibles, premium increases and unpaid medical costs are responsible for medical debt, most people cannot afford a renewal-rate increase. Consumers who have individual health plans do have recourse from an unreasonable renewal increase.

"It's illegal [for an insurance company] to raise premiums without justification," says Kimberlin-Murphy. "If you get a rate increase and it’s something you can no longer afford, put together a 12-month log of the cost of your insurance premiums and compare it to what’s been paid [in your claims] by the insurer. Send it to your state’s insurance commissioner and they will send an inquiry back to your health insurer asking them to justify the rate increase."

Kimberlin-Murphy says if the insurance commissioner finds that the insurer cannot justify the increase, it must keep premiums at the same level until the next renewal period.

6. Get a health savings account now, before disaster strikes.

Dellutri suggests opening a health savings account — especially if you have a family.

"This is a great way to offset medical expenses," he says. "The dollars you put into the account grow tax-free and they can be used for deductibles and other health care expenses."

What are your rights?

There are specific rules that debt collectors must follow if they contact you. According to the Federal Trade Commission’s Fair Debt Collection Practices Act, a debt collector:

1. Cannot threaten you.
2. Cannot make public a list of consumers who do not pay their debts.
3. Cannot use obscene or profane language or repeatedly use telephone calls to harass the consumer.
4. Cannot call before 8 a.m. or after 9 p.m.
5. Cannot use false or misleading statements such as posing as a government representative or attorney or saying that they work for a credit bureau when they contact you. They also cannot say they can arrest you if you don’t pay.
6. Must cease contact with you if you send them a letter telling them to stop.
7. Can only call or write you if they intend to file a legal action against you, if you have sent them a letter telling them to cease contact.
8. Cannot continue to call you at work if your employer tells them to stop.