It is always best to ask about payment plans or programs that help with medical expenses before a debt becomes delinquent. Unpaid medical bills carry damaging and unpleasant consequences. Unfortunately, sometimes you just do not have the money available to pay off the debt. In some cases, you may not even know about the debt. Although medical debt is a common problem, it is not overlooked by the credit bureaus or the courts.
Reducing Your Overall Credit Score
Unpaid medical bills are eventually reported to the credit bureaus. The amount of time the doctor or medical facility waits before reporting the debt will vary. Bankrate.com estimates most medical providers forward bills to collection agencies within 90 to 120 days. The debt will appear as the entire balance you owe, along with late fees that you may have accumulated. According to Bankrate.com, medical debt is the most common type of collection account. Although you may have heard the myth that medical debt does not count against you, all negative accounts appearing on your credit report will lower your score. Collection accounts can remain on your credit report for at least seven years.
Dealing With a Collection Agency
If you do not pay your medical bills, medical providers may attempt to collect the debt in-house through their billing department. If they are unable to recover the money you owe, they will likely sell the debt to a third-party collection agency. Debt collectors use more aggressive tactics to collect the money, including persistent phone calls and letters. The Fair Debt Collection Protection Act is designed to protect you from abuse or harassment from third-party debt collectors. For example, a debt collector cannot discuss your debt with your employer, family or friends.
Incurring Late Fees
If your medical bills remain unpaid, they can accumulate interest and late fees. Although you may attempt to negotiate the debt, your creditor might require you to pay off the entire balance. Several states limit what hospitals can charge for services, including California, Illinois, Minnesota and New York. Some states also cap the interest rate charged on medical debt. For example, Minnesota limits interest to 8 percent.
Unpaid medical debt can lead to a lawsuit. If the doctor, medical facility, hospital or debt collector sues, they may obtain a judgment from the court. If the judgment is in favor of the creditor, you will be required to pay the debt. The debt can be collected within legal means, which varies based on state law. Recovery methods can include garnishing wages and levying assets.
- Nolo: Managing High Medical Bills
- Washington Law Help: Getting Help With Medical Debt in Washington State
- Bankrate.com: How Will Unpaid Medical Bills Hurt Credit?
- Forbes: Seven Tips for Fighting and Paying a Big Hospital Bill
- Star Tribune: Minnesota Sues Over Allina's 18% Interest Rate
- Consumer Financial Protection Bureau. "What if I Believe I Do Not Owe the Debt or I Want More Information About the Debt?" Accessed July 9, 2020.
- Consumer Financial Protection Bureau. "How Long Does Negative Information Remain on My Credit Report?" Accessed July 9, 2020.
- Federal Trade Commission. "How to Stop Calls From Debt Collectors." Accessed July 9, 2020.
- Experian. "Can Paying off Collections Raise Your Credit Score?" Accessed July 9, 2020.
- Experian. "When Does the 7 Year Rule Begin For Delinquent Accounts?" Accessed July 9, 2020.
- Federal Trade Commission. "Time-Barred Debts." Accessed July 9, 2020.
- Consumer Financial Protection Bureau. "Are There Laws That Limit What Debt Collectors Can Say or Do?" Accessed July 9, 2020.
- Experian. "Will Settling a Debt Affect My Credit Score?" Accessed July 9, 2020.
- Consumer Financial Protection Bureau. "What Is Harassment by a Debt Collector?" Accessed July 9, 2020.
- Nolo. "The New Bill Collector Tactic: Jail Time." Accessed July 7, 2020
- Experian. "What Should I Do When My Account Goes to Collections?" Accessed July 9, 2020.
- Consumer Financial Protection Bureau. "Can a Debt Collector Garnish My Bank Account or My Wages?" Accessed July 9, 2020.
- Culik Law. "What Happens if a Debt Collector Sues You at the Wrong Address?" Accessed July 9, 2020.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.