What Happens When Medical Bills Go to Collections? (2024)

FAQs

What happens when medical debt goes to collections? ›

If you can't pay your medical bills, the medical provider can sell your debt to a collection agency to recover the unpaid amount. This can affect your credit score negatively, which can damage your ability to secure loans.

If you receive a notice from a debt collector, it's important to respond as soon as possible—even if you do not owe the debt—because otherwise the collector may continue trying to collect the debt, report negative information to credit reporting companies, and even sue you.

For medical debt, it is common to negotiate to a lower amount than you were originally billed. For medical debt, creditors will typically settle for roughly the amount insurance companies pay for the same services, which is usually much lower than the amount that would be billed to an uninsured person.

In simple terms, medical billing collections is a process that healthcare service providers engage in to get reimbursed for services they provide to patients. Oftentimes, it can be difficult for patients to navigate their responsibility and understand how much they owe.

If you don't pay, the collection agency can sue you to try to collect the debt. If successful, the court may grant them the authority to garnish your wages or bank account or place a lien on your property. You can defend yourself in a debt collection lawsuit or file bankruptcy to stop collection actions.

Key takeaways. The major credit reporting agencies have initiated a change so that medical bills of less than $500 will not show up on your credit report after going to collections.

The worst thing they can do

If you fail to pay it off, the collection agency could file a suit. If you were to fail to show up for your court date, the debt collector could get a summary judgment. If you make an appearance, the collector might still get a judgment.

If you refuse to pay a debt collection agency, they may file a lawsuit against you. Debt collection lawsuits are no joke. You can't just ignore them in the hopes that they'll go away. If you receive a Complaint from a debt collector, you must respond within a time frame determined by your jurisdiction.

You cannot remove collections from your credit report without paying if the information is accurate, but a collection account will fall off your credit report after 7 years whether you pay the balance or not.

Summary: Ultimately, it's better to pay off a debt in full than settle. This will look better on your credit report and help you avoid a lawsuit. If you can't afford to pay off your debt fully, debt settlement is still a good option.

How do you negotiate medical collection debt? ›

Whether unpaid medical debt will affect your credit depends on the original reported balance, how long the debt has existed and which credit scoring model is used. Paid medical collections were erased from credit reports in July 2022 and are no longer reported by the three major U.S. credit bureaus.

Yes, healthcare providers can share protected health information (PHI) with debt collectors under specific circ*mstances without violating HIPAA. Debt collection is considered a payment activity under HIPAA, so sharing necessary information with debt collectors is permitted.

If the unpaid balance in collections is less than $500, the account won't appear on your credit report at all. In addition, all three credit bureaus will remove medical collection debt from your credit history once it is paid off.

The multistage debt collection process varies depending on the creditor, but it usually includes phone and mail notices, stoppage of services (if applicable), notifications to credit reporting bureaus, assignment to third-party collection agencies, and potential court proceedings.

Judgments stay either seven years or until the statute of limitations in your state is up, whichever is longer. And here's one more caveat: While unpaid medical bills will come off your credit report after seven years, you may still be legally responsible for them depending on the statute of limitations.

After seven years, medical collections will drop off your credit reports, even if you haven't paid them off. And if you pay them off at any time, they'll be removed from your reports.