What Happens If You Refuse to Pay Medical Bills?

Medical bills represent a significant financial challenge for many individuals, often arising unexpectedly from accidents, illnesses, or routine medical procedures. Navigating healthcare costs, insurance coverage, and billing practices can be daunting, leading to confusion about financial responsibilities. Some individuals find themselves unable to meet payment obligations due to factors like high deductibles, limited insurance benefits, or a lack of financial resources. When these bills remain unpaid, a series of escalating financial and legal consequences can unfold.

How Medical Bills Become Unpaid Debt

The journey of a medical bill from healthcare service to unpaid debt involves distinct stages. After receiving medical care, the provider submits a claim to the patient’s insurance company. Once the insurer processes the claim and pays its portion, any remaining balance becomes the patient’s responsibility. The healthcare provider then issues an initial bill to the patient for this outstanding amount.

Providers offer a grace period for payment, which can range from 60 to 120 days from the first billing date. During this time, the provider may send follow-up invoices, make reminder calls, or offer payment options to encourage settlement. Many healthcare facilities also provide financial assistance programs or payment plans to help patients manage their balances.

If the bill remains unpaid after this grace period, the healthcare provider may escalate collection efforts. This involves transferring or selling the debt to a third-party collection agency. Some hospitals are prohibited from selling patient debt unless the patient is ineligible for financial assistance or has not responded to assistance offers for 180 days. This transfer marks a point where the debt transitions from an internal billing matter to an external collection process.

Credit Score Impact

Unpaid medical bills can significantly affect an individual’s credit standing, though their reporting to credit bureaus follows specific rules. Medical debt does not immediately appear on a credit report; there is a grace period of 180 days of non-payment before it is sent to collections. Major credit bureaus do not report unpaid medical debt until one year after it has been sent to collections, providing additional time for resolution.

The impact on credit scores depends on the scoring model used and the debt’s status. FICO scores, which heavily weigh payment history and amounts owed, can be negatively affected if medical debt goes to collections. However, newer FICO models, such as FICO 9 and 10, treat medical debt in collections less severely than other types of collection accounts. VantageScore models, particularly 3.0 and 4.0, exclude all medical collection data from their score calculations, regardless of the amount or age of the collection.

As of early 2023, major credit reporting agencies stopped including medical collection debts under $500 on credit reports. Any medical debt placed in collections but subsequently paid is now removed from credit reports. A new federal rule is expected to remove all medical debt from consumer credit reports in March 2025, irrespective of the amount or payment status. Despite these changes, an unpaid medical debt reported to collections can remain on a credit report for up to seven years.

Debt Collection Procedures

When a medical bill remains unpaid and is transferred to a third-party collection agency, procedures are initiated to recover the outstanding amount. Collection agencies primarily use phone calls and demand letters to contact debtors. These communications aim to inform the individual about the debt and encourage payment or a payment plan.

Federal regulations, specifically the Fair Debt Collection Practices Act (FDCPA), govern how debt collectors can communicate with consumers. Collectors are prohibited from calling more than seven times within a seven-day period. If a telephone conversation about the debt occurs, collectors cannot call again for seven consecutive days following that conversation. Calls are also restricted to certain hours, between 8:00 a.m. and 9:00 p.m. in the consumer’s time zone, unless otherwise agreed upon.

Collection agencies may attempt to negotiate payment plans or reduced settlement amounts, as their goal is to recover as much of the debt as possible. While they can contact third parties, such as neighbors or family members, this is limited to obtaining location information, and they are prohibited from discussing the debt itself with anyone other than the consumer or their legal representative. Consumers also have the right to request in writing that a debt collector cease contact, which can stop phone calls and letters.

Legal Consequences of Unpaid Medical Debt

If debt collection efforts prove unsuccessful, creditors or collection agencies may pursue legal action to recover unpaid medical debt. This begins with filing a debt lawsuit in court. The debtor receives official court papers, known as a summons and complaint, which notify them of the lawsuit. Responding to these documents within the specified timeframe is important to avoid a default judgment.

A default judgment can be entered against the debtor if they fail to respond to the summons or appear in court. This judgment legally establishes that the debt is owed and allows the creditor to pursue various enforcement methods. If a case proceeds to trial, a court will eventually render a decision, and if the judgment is in favor of the creditor, it grants them the right to collect the debt through legal means.

One post-judgment enforcement method is wage garnishment, where a portion of the debtor’s earnings is legally withheld by their employer and sent directly to the creditor. Federal law imposes limits on how much of an individual’s disposable earnings can be garnished, ensuring that a minimum amount of income remains for living expenses. Another enforcement option is a bank levy, which allows the creditor to seize funds directly from the debtor’s bank accounts to satisfy the judgment.

Creditors may also seek property liens, which are legal claims against a debtor’s real estate. A lien can complicate the sale or refinancing of property, as the debt must be satisfied before the property can be transferred. While some states offer protections for primary residences against certain types of liens or forced sales for medical debt, the ability to place a lien requires a court judgment.

The statute of limitations, which varies by state, dictates the timeframe within which a creditor can sue to collect a debt. The debt itself does not disappear even if the statute of limitations has passed, and making a partial payment can sometimes reset this timeframe.