What Happens If You Don’t Pay a Medical Bill in Collections?

When a medical bill remains unpaid, healthcare providers may turn the outstanding balance over to a third-party debt collection agency. This means the original provider has enlisted or sold the debt to an entity specializing in debt recovery. Medical debt often arises unexpectedly from acute medical needs, unlike other planned consumer debts. This can include charges for hospital stays, doctor visits, or medical equipment not fully covered by health insurance. Approximately one in five Americans are affected by medical bills in collections, representing a significant financial burden.

Immediate Repercussions of Unpaid Medical Debt

When a medical bill enters collections, individuals experience direct financial consequences. Debt collection agencies often initiate communication through frequent phone calls and letters.

Unpaid medical debt can significantly affect an individual’s credit report and score. While medical debts under $500 are generally not reported to credit bureaus, larger balances can appear on credit reports after a grace period, typically one year from the date the account became past due. Once reported, an unpaid medical collection account can negatively influence credit scores, hindering future credit access.

A negative mark on a credit report can make it challenging to secure a loan for a car or a home, or to rent an apartment. Insurance premiums, such as for auto insurance, could increase due to a lower credit score. Medical debt in collections can also become a factor in employment decisions, as some employers review credit history as part of background checks.

Even if an individual makes partial payments, a medical bill can still be sent to collections if the full amount is not paid within the provider’s specified timeframe, which can range from 90 to 180 days. Consumers are frequently contacted by debt collectors about medical debt more than any other type of debt.

Potential Legal Recourse for Creditors

Unpaid medical debt can escalate beyond collection calls and credit report impacts, potentially leading to legal actions by creditors or collection agencies. If debt remains unpaid, the collection agency may file a lawsuit against the individual to obtain a judgment. This legal process begins with the individual receiving a summons and complaint, formal documents requiring a response, usually within 20 to 30 days.

If the individual fails to respond or if the court rules in favor of the collection agency, a legal judgment will be entered against them. A judgment legally confirms the debt and grants the creditor tools for collection. This judgment can then be used to pursue various enforcement mechanisms.

Wage Garnishment

One common enforcement mechanism is wage garnishment, where a portion of the individual’s earnings is legally withheld by their employer and sent directly to the creditor. The amount that can be garnished is limited by federal and state laws, typically to a percentage of disposable earnings.

Bank Levy

Another method is a bank levy, which allows the creditor to freeze funds in the individual’s bank account up to the amount of the judgment. This can result in immediate loss of access to deposited funds.

Property Lien

In some cases, particularly for larger debts, a judgment can lead to a property lien. A property lien places a legal claim against real estate owned by the individual, such as a home. While a lien does not immediately force the sale of the property, it must be satisfied before the property can be sold or refinanced.

Verifying and Disputing a Medical Bill in Collections

Upon receiving notification that a medical bill has entered collections, it is important to verify its accuracy and validity. Gather all relevant documentation related to the medical service, including original provider’s bills, itemized statements, and any Explanation of Benefits (EOB) forms from your insurance company. An itemized bill provides a detailed breakdown of services, procedures, and charges, which helps identify discrepancies.

Formally request debt validation from the collection agency. This request, ideally sent via certified mail with a return receipt, should ask the agency to provide proof of the debt, including the original creditor’s name, the amount owed, and evidence of their legal right to collect. Federal law requires collection agencies to provide this information upon request. Send this validation request within 30 days of initial contact from the collection agency to preserve certain rights.

After reviewing the validation information, if inaccuracies or errors are identified, formally dispute the debt with both the collection agency and, if applicable, the credit bureaus. Disputes with the collection agency should clearly outline specific errors found, such as incorrect dates of service, duplicate charges, or services not rendered. Provide copies of supporting documentation, but retain the originals.

When disputing with credit bureaus, you can initiate the process online, by mail, or by phone. Credit bureaus are required to investigate your dispute, typically within 30 days. If the investigation confirms an error, the incorrect information will be removed from your credit report. This helps ensure you are only responsible for legitimate debts and prevents inaccurate information from negatively impacting your credit.

Strategies for Resolving Medical Debt

After verifying the medical debt and addressing any disputes, individuals have several resolution strategies.

Negotiating a Settlement

One common approach is negotiating a settlement with the collection agency or the original healthcare provider. Collection agencies are often willing to accept a lump-sum payment for a reduced amount, sometimes between 30% to 70% of the original debt, to close the account quickly. Get any settlement agreement in writing before making a payment.

Establishing a Payment Plan

If a lump-sum payment is not feasible, establishing a payment plan directly with the collection agency or original provider is another option. Many providers work with individuals to create affordable monthly payment arrangements. This can prevent further collection actions and help manage the debt. Ensure the payment plan is documented in writing.

Financial Assistance Programs

Exploring financial assistance programs or charity care offered by hospitals and healthcare systems can also provide relief. Many non-profit hospitals have policies to provide free or reduced-cost care to uninsured or underinsured patients who meet specific income and asset criteria. Information is usually available on the hospital’s website or financial aid department.

Seeking Professional Assistance

For those struggling to navigate these options, seeking professional assistance can be beneficial. Non-profit credit counseling services can provide guidance on budgeting, debt management plans, and negotiating with creditors. Legal aid organizations may also offer assistance, particularly if there are complex billing disputes or if legal action has been threatened.

Protections Under Debt Collection Laws

Consumers dealing with medical debt have specific protections under federal law, primarily through the Fair Debt Collection Practices Act (FDCPA). This act governs third-party debt collectors, prohibiting abusive and deceptive practices.

The FDCPA prohibits debt collectors from engaging in harassment, such as repeated phone calls or using obscene language. It also forbids false or misleading statements, including misrepresenting the amount owed, falsely claiming to be attorneys, or threatening actions they cannot legally take, like arrest. Unfair practices, such as attempting to collect charges not authorized by the original agreement or by law, are also prohibited.

Collectors cannot call before 8:00 AM or after 9:00 PM local time unless explicitly permitted by the individual. They are also restricted from contacting an individual at their place of employment if the individual has informed them that their employer prohibits such communications. If a consumer sends a written request to cease communication, the collector must stop contacting them, except to inform them that collection efforts are ceasing or that legal action will be pursued.

Consumers who believe a debt collector has violated their rights under the FDCPA can report these violations to the Consumer Financial Protection Bureau (CFPB) or their state’s Attorney General. Keeping detailed records of all communications with debt collectors (dates, times, content) is valuable when reporting violations.