What Happens If I Don’t Pay Medical Debt?

Medical debt can arise from various healthcare services, encompassing everything from emergency room visits to planned surgical procedures. When these bills remain unpaid, individuals may face a series of escalating actions. Understanding these potential steps is important for anyone navigating such a situation.

Initial Steps from Creditors

When a medical bill is not paid by its due date, the healthcare provider or billing entity will typically initiate contact. This often begins with reminder notices sent via mail or email, indicating the outstanding balance. These communications serve as a prompt for payment before the account becomes overdue.

If the bill remains unpaid, the provider’s billing department may increase communication efforts, often through phone calls. These calls attempt to discuss the unpaid balance, confirm billing information, or offer payment arrangements directly with the provider. Many providers offer grace periods, which might extend the original due date by 30 to 60 days.

During this initial phase, there are opportunities for direct negotiation with the healthcare provider. Patients can discuss payment plans, explore financial assistance programs, or inquire about discounted rates if uninsured or eligible for charity care. Engaging in these discussions can help prevent the debt from being sent to a third-party collection agency.

Impact on Credit and Collections

Unpaid medical debt can affect an individual’s financial standing, particularly their credit report. Medical debts are not typically reported to credit bureaus immediately upon becoming overdue. Instead, they usually appear after about 180 days of non-payment, often once transferred to a third-party collection agency.

Recent changes in credit reporting practices have introduced thresholds for medical debt. As of July 2022, paid medical collection debt is no longer included on consumer credit reports. As of early 2023, medical collection debt under $500 is generally not included. These changes aim to mitigate the negative impact of smaller medical debts on credit scores, though larger unpaid balances can still be reported.

When unpaid medical debt appears on a credit report, it can lower an individual’s credit score. A reduced credit score can negatively affect future borrowing capacity for financial products like mortgages, auto loans, or personal loans. It can also influence approval for rental applications, utility services, and some employment opportunities, as credit checks are sometimes part of these processes.

Third-party collection agencies become involved when the original healthcare provider cannot collect the debt themselves. These agencies either purchase the debt for a fraction of its value or are hired to collect on behalf of the provider. Once the debt is with a collection agency, the individual owes this new entity, which will begin its own communication efforts. Collection agencies typically send demand letters and make repeated phone calls to secure payment.

Potential Legal Consequences

If medical debt remains unpaid after collection efforts, a creditor or collection agency may pursue legal action. This typically begins with filing a lawsuit in civil court to obtain a judgment. Receiving a summons, which notifies an individual of the lawsuit, is the official start of this process.

It is important to respond to a summons within the specified timeframe, usually 20 to 30 days. Failing to do so can result in a default judgment, where the court rules in favor of the plaintiff because the defendant did not appear or respond. This judgment legally validates the debt and allows the plaintiff to pursue enforcement actions without further court proceedings.

Once a judgment is obtained, the creditor or collection agency can take post-judgment actions to collect the debt. One common method is wage garnishment, where a portion of an individual’s disposable earnings is withheld by their employer and sent directly to the creditor. Federal law limits wage garnishment to 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage, whichever is less.

Another enforcement action is a bank account levy, allowing the creditor to seize funds directly from an individual’s bank accounts to satisfy the judgment. This typically involves a court order directing the bank to freeze and release funds up to the judgment amount. Additionally, a property lien can be placed on real estate or other significant assets. While a lien does not immediately seize property, it creates a claim against it, potentially affecting future sales or refinancing until the debt is satisfied. Rules and thresholds for these actions, including asset exemptions, vary by jurisdiction.