Whether you've had major surgery or a routine physical, someone has to foot the bill. When your health insurance doesn't cover the cost of treatment, the bill is sent to you for payment. It can be sent to a collection agency if you don't pay by the due date. This starts an avalanche of collections activity, beginning with a warning letter and potentially ending with a court judgment, wage garnishment or a property lien to force payment.
TL;DR (Too Long; Didn't Read)
When a medical bill falls past due, the medical facility will transfer it to an in-house or external collections agency. The agency will attempt to negotiate a payment plan with you.
Collection Team Gets Involved
When your bill falls a certain number of days past due, the medical facility will refer it to an in-house collection department or an external debt collection agency. There's no definite time frame for sending the bill to collections. Some creditors will wait three to six months before starting the collections process while others will transfer the debt after the first due date has passed.
Expect to receive telephone calls and past due notifications as an opening shot, and remember that your bill is also growing with late fees and interest for every month it's overdue.
Impact on Credit Score
The collections agency has the right to report your unpaid bill to credit agencies, which can drop your credit score significantly. The collection account stays on your report for seven years. Paying the debt won't improve your score – once the collection account is reported, it's already too late. Generally, however, a credit bureau will not report medical collections until they are 180 days past due. This means you have a six-month grace period to make payment arrangements before your credit history is affected.
No Shady Collection Practices
The federal Fair Debt Collections Practices Act bans the use of underhanded collection practices and governs what a third-party collections agency can do to collect the past-due debt. Under the terms of the FDCPA, debt collectors cannot call you before 8 a.m. or after 9 p.m., harass you, call you at work if you ask them not to, lie to you or threaten to sue you unless they are legitimately planning to take you to court. You have the right to send a written request to the collector insisting they stop calling you at home.
What the collections agency can do is work out a payment plan to help you pay your medical bills.
Keep in mind that under the Emergency Medical Treatment and Active Labor Act, the medical provider must care for you regardless of your ability to pay in the event that you need emergency care. You'll still end up with bills, but it's worth seeing if you can negotiate the balance down or even have the balance written off if you cannot pay due to financial difficulty. The hospital is forbidden to go after any balance if you have Medicaid.
Starting a Civil Action
If the collection agency's efforts are going nowhere, you can probably expect a summons to arrive at your door. The medical facility you owe the money to has the right to sue you for the debt and any associated costs in civil court. The statute of limitations varies by state, but a creditor generally has between three and 10 years from the date of the bill to file a lawsuit.
You have the option of going to court and fighting the bill if you're sued. You'll need a legal defense – for example, that the amount of the bill is incorrect or you've already paid it. If you don't show up, the judge will almost certainly enter a judgment against you for the money.
Now It Gets Serious
Losing the case and having a judgment awarded against you is serious because the medical provider can use the judgment to take money directly out of your wages or bank account to pay the bill. The creditor can also file a property lien which gives it the right to foreclose on your home if you don't pay the debt within a certain period of time. At this point, you'll need to consult with an attorney or free legal advice center. If all else fails, you might have the option of filing for bankruptcy to reduce or eliminate the medical debt.
- Investopedia: Medical Debt: What to Do When You Can’t Pay
- Investopedia: Fair Debt Collection Practices Act
- Consumer Reports: What Medical Debt Does to Your Credit Score
- Credit.com: Statute of Limitations on Debt Collection by State
- Very Well Health: The Emergency Medical Treatment and Labor Act
- Bankruptcy Center of John D. Raymond: Can Filing for Bankruptcy Help Me Deal with Medical Debt in California?