What Are the Consequences of Not Paying Medical Bills?

Unpaid medical bills represent a significant financial challenge for many individuals across the United States. Healthcare costs can be substantial, often leading to unexpected and overwhelming expenses. When these bills remain unpaid, a series of consequences can unfold, affecting an individual’s financial standing and future. Understanding the progression of these consequences is important for anyone navigating the complexities of medical debt. This process differs from other forms of consumer debt due to the unique nature of healthcare billing and various consumer protections that apply.

Initial Consequences and Debt Collection

When a medical bill goes unpaid, the healthcare provider typically initiates a series of collection attempts, including billing statements, reminder notices, and phone calls. If the debt remains outstanding, the provider may then opt to sell the debt to a third-party collection agency or hire one to manage the collection process. Hospitals often cannot sell patient debt to a debt buyer unless the patient is ineligible for financial assistance or has not responded to assistance offers for 180 days.

Upon receiving the debt, third-party collection agencies will begin their own efforts to recover the amount owed through phone calls and letters. These agencies operate under specific federal regulations, primarily the Fair Debt Collection Practices Act (FDCPA), which prohibits them from engaging in abusive, unfair, or deceptive practices. Collectors cannot misrepresent the amount owed, threaten illegal actions, or harass consumers through excessive calls or aggressive language. They are also required to provide validation of the debt upon request, verifying its legitimacy and the consumer’s responsibility.

The FDCPA also outlines consumer rights, including the ability to stop a third-party debt collector from contacting them by sending a written request. While this can halt direct communication, it does not eliminate the debt itself. Medical debt is particularly susceptible to billing errors and inaccuracies, making it important for consumers to scrutinize any bill received from a provider or collector. Disputing an inaccurate bill or one that should have been covered by insurance is a crucial step in this stage. A 180-day grace period from the initial billing date generally applies before negative information related to medical debt can be reported to credit bureaus or before a lawsuit can be filed.

Credit Score Implications

The impact of unpaid medical bills on an individual’s credit score has undergone significant changes in recent years, making it distinct from other types of debt. Historically, medical debt could severely depress credit scores, but current policies offer more consumer protection. The three major credit reporting agencies—Experian, TransUnion, and Equifax—have implemented specific rules regarding how medical debt appears on credit reports.

As of July 2022, paid medical collections are no longer included on credit reports. This means that once a medical debt in collections is settled, it should be removed from an individual’s credit history, preventing it from negatively affecting their score. Furthermore, unpaid medical collections are subject to a 365-day grace period from the date of the initial billing before they can appear on a credit report. This extended period allows consumers time to resolve billing disputes, work with insurance providers, or arrange payment plans before the debt impacts their creditworthiness.

Another important change, effective April 2023, is that medical collections with an initial balance under $500 are no longer reported on credit reports at all. This provision aims to protect consumers from minor medical expenses unduly harming their credit standing. However, if an unpaid medical collection exceeds $500 and remains outstanding after the one-year grace period, it can still negatively affect credit scores. Such accounts can remain on a credit report for up to seven years from the original delinquency date, potentially hindering access to new credit, loans, or even housing.

Recent developments further strengthen consumer protections. In January 2025, the Consumer Financial Protection Bureau (CFPB) finalized a rule to ban medical bills from credit reports used by lenders. This rule also prohibits lenders from using medical information in their lending decisions, aiming to prevent medical debt from coercing payments for potentially inaccurate bills and to improve access to credit for those with medical debt. Additionally, some credit scoring models, such as VantageScore, stopped including medical debt in collections when calculating scores as of August 2022, further reducing the impact of these debts on credit assessments.

Legal Proceedings and Asset Seizure

When initial collection efforts and credit reporting prove insufficient, healthcare providers or debt buyers may escalate their pursuit of unpaid medical bills through legal action. This represents the most severe consequence, as it can lead to court judgments and the potential seizure of assets. A lawsuit for medical debt typically commences after a period of failed direct collection attempts, though the decision to sue can depend on the debt amount and the creditor’s willingness to incur legal costs.

A civil lawsuit begins with the debtor receiving a formal “Summons and Complaint,” legal documents notifying them of the lawsuit and the claims being made. It is imperative to respond to these documents within the specified timeframe, which commonly ranges from 20 to 35 days, depending on local court rules. Failing to file a response can lead to a “default judgment” being entered against the debtor. A default judgment is a court ruling in favor of the creditor, granted without the debtor presenting their side, effectively confirming the debt and allowing the creditor to proceed with enforcement actions.

Once a court judgment is obtained, it legally establishes the debt and grants the creditor powerful tools to collect. Judgments typically remain enforceable for a significant period, often ranging from 5 to 10 years in most jurisdictions, and in some instances, they can be renewed, extending their lifespan for many more years. While a judgment may appear on a credit report for up to seven years, its legal enforceability can persist much longer, allowing creditors to pursue collection methods that directly impact a debtor’s finances and property.

One common enforcement method is wage garnishment, where a portion of a debtor’s earnings is legally withheld by their employer and sent directly to the creditor. Federal law, the Consumer Credit Protection Act, places limits on how much can be garnished from disposable earnings, generally restricting it to the lesser of 25% of disposable income or the amount by which disposable income exceeds 30 times the federal minimum wage. Many state laws provide additional protections, sometimes limiting garnishment more strictly or outright prohibiting it for certain types of income. Federal benefits such as Social Security and Social Security Disability benefits are generally exempt from garnishment for medical debt.

Another powerful collection tool following a judgment is a bank levy, which allows creditors to seize funds directly from a debtor’s bank account. For private creditors, a court order is a prerequisite for initiating a bank levy. Upon receiving the levy order, the bank is legally obligated to freeze funds in the account up to the amount of the debt. The frozen funds are then transferred to the creditor to satisfy the judgment. Certain funds, however, are exempt from bank levies, including Social Security benefits, veteran’s benefits, and public assistance. Debtors typically have a limited time to file a “Claim of Exemption” to protect these or other necessary funds from being seized.

In some cases, a judgment can also result in a property lien. A lien is a legal claim placed on real estate or, less commonly, personal property, which does not transfer ownership but encumbers the asset. This means that if the property is sold or refinanced, the lien must typically be satisfied from the proceeds. While property liens can be a consequence of unpaid medical debt, some jurisdictions have enacted laws specifically prohibiting healthcare providers from placing liens on a patient’s primary residence to collect medical debt, aiming to protect homeowners from losing their homes over such obligations. The ability to pursue these severe collection actions underscores the importance of addressing medical debt proactively and understanding applicable consumer protections.