6 Steps to Deal With Medical Debt Collection
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Facing a medical procedure or treatment is challenging enough, without the financial burden of looming medical bills. It can be difficult to foresee medical expenses ahead of time — accidents happen, after all — but paying them off can be hard, especially if you weren’t prepared for them.
According to the Consumer Financial Protection Bureau, 58% of unpaid debt in collections are medical bills. If your medical debt is in collections and you were contacted by a debt collector, you’ll want to know what your options and rights are. Here’s how to handle a medical debt collection.
- How to deal with medical debt collections
- How medical debt affects your finances
- 4 options to pay off medical debt
How to deal with medical debt collections
- Don’t ignore bills
- Verify the medical debt
- Confirm your insurance benefits
- Send a cease and desist letter
- Determine the statute of limitation for the debt
- Decide how you want to move forward
1. Don’t ignore bills
Your unpaid medical bills won’t likely be sent to a debt collection agency the day after your bill is due. The timeline before an unpaid medical debt is sent to collections depends on your provider. Some providers send unpaid debt to collections as soon as 60 days after its due date while other providers may send unpaid debt to collection 180 days after it’s due.
If you’re past-due on a medical bill, it’s best to reach out to your provider immediately to work out a payment plan or negotiate the debt amount, first. Once you have a medical debt collection, it will damage your credit score and the collector may be able to sue you to collect on the debt.
2. Verify the medical debt
When your provider sends an unpaid medical debt to a debt collector, the collector or agency will make attempts to reach out to you for payment. Collectors are required to send you a written notice within five days of their first contact, containing the following information:
- The amount of the debt
- The creditor who is owed the debt
- A statement noting that you have 30 days to dispute the validity of the debt in writing
- A statement that says that, upon receipt of your written dispute, the collector will supply a verification of the debt or court judgment to you within 30 days, including the name and address of the original creditor if it’s changed
Don’t immediately acknowledge that the medical debt is yours or agree to make any payments yet — especially if the collector didn’t provide the above details. It’s your right to send a written request asking the debt collector to verify the debt to ensure it’s, in fact, yours and that you actually owe it.
3. Confirm your insurance benefits
Once the collector verifies the debt and supplies you with the details, review the information in your health insurance policy to see whether the charges should’ve been covered through your plan.
Billing errors, such as double charges, canceled procedures, a medical procedure code that was filed wrong or incorrect patient information, can cause issues with medical bills being erroneously charged. Correcting medical billing mistakes can potentially save you money and greater hassle later.
4. Send a cease and desist letter
You also have the right to demand that the collector stop contacting you about the debt. This might come up, for example, if you’ve confirmed and notified the collector that the debt does not belong to you, but they’re still reaching out. By sending a written cease and desist letter to the collector or agency, they can’t legally contact you unless it’s to notify you about the next steps they plan on taking.
5. Determine the statute of limitation for the debt
A creditor or debt collector can legally sue you to collect on an unpaid debt. However, the timeline they can take you to court to obtain payment is finite. Different types of debt carry different expiration timelines — this is called, the statute of limitations.
The statute of limitations for medical debt, in particular, also depends on the state you live in and the state law that’s cited in your contract with your provider. For example:
- In Florida, the statute of limitations for a written medical contract is five years
- In Texas, the statute of limitations for a written medical contract is four years
Legally, a debt collector can still contact you to collect, if the medical debt is expired (i.e. time-barred). However, they can’t sue you or threaten to sue you, if it knows that the statute of limitations for the medical debt has passed. If you feel the debt may be time-barred, ask the collector if it is — they’re legally required to respond truthfully.
If they won’t disclose whether the debt is time-barred, you can ask when the last payment was made on the account. Generally, the clock starts on the statute of limitations the day after the first missed payment. With this information, you can get a clearer sense of whether the debt is outside of the statute of limitation window.
6. Decide how you want to move forward
Depending on various factors up until this point, you may have a few options on how to move forward. If the medical debt is within the statute of limitations and you’ve verified that the debt is yours, you can choose to pay the unpaid medical bill or determine a realistic payment plan.
If you’ve verified that the unpaid debt is yours, but it’s passed the statute of limitations, you also have a few options:
- Choose to not pay the debt. The collector can’t sue you for a time-barred debt, so your wages can’t be garnished as a result. However, the medical debt collection will be on your credit record which can make it harder to get approved for credit in the future.
- Negotiate a partial payment. Keep in mind, however, that payments made may restart the clock on a new statute of limitation window, giving collectors the option to sue you for the full amount. Speak to a debt lawyer to learn more about your specific situation.
- Pay the medical debt in full. You can choose to move on from the medical debt collection by paying it off or negotiating a lower payoff amount with the collector. Make sure that any agreements are made in writing, and states that upon receiving the agreed upon reduced payment, the debt is settled and you’re no longer responsible for it.
Knowing your rights under the Fair Debt Collection Practices Act can help you make an informed decision about how to deal with a medical debt collection. If you feel a debt collector violated your rights, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) at (855) 411-CFPB (2372) or online. You can also reach out to your state attorney general’s offer and the Federal Trade Commission to report a debt collection violation.
How medical debt affects your finances
Having a medical debt collection, isn’t an ideal situation to be in. A medical debt collection on your credit report negatively affects your score, and can make it harder for you to get access to new lines of credit and competitive rates.
Although having a time-barred medical debt prevents you from being taken to court for payment, but the debt collection may remain on your record for up to seven years. If you’re facing an overwhelming medical bill, you may be able to avoid having it go to collections with a few alternative payment strategies.
4 options to pay off medical debt
- Work out a payment plan
- Negotiate costs or alternate treatment
- Take out a medical loan
- Get a medical credit card
1. Work out a payment plan
Reach out to your provider as soon as you know you might have a difficult time making a payment. Your health provider may offer interest-free installment plans so that you can repay the medical debt in manageable monthly payments.
Make sure you also inquire about fees, interest or other costs associated with a payment plan to ensure it’s still an affordable option for you.
2. Negotiate costs or alternate treatment
With so many medical bills ending up in collections, your provider may be open to bringing down the cost of your medical bill, if you guarantee to pay the reduced bill in full, immediately (or within a short period of time).
If you already know that your insurance coverage won’t cover a particular medical bill, you can speak to your provider in advance to negotiate a lower price ahead of being seen. Your provider may or may not agree to lower the cost of their services. You may also consider other treatment options, such as finding clinics with a sliding fee based on patient income.
3. Take out a medical loan
Taking out debt should be a last resort, if your provider is unwilling to lower their cost of care or if they don’t offer a payment plan. If the service or treatment is urgent and can’t wait until you save enough cash to cover it, you can look into a medical loan.
Medical loans are unsecured personal loans that may offer lower interest rates, compared to a payday loan, financing through your provider or putting medical debt on a traditional credit card. To get approved for the most competitive interest rates through this option, you’ll need a strong credit score.
4. Get a medical credit card
A medical credit card is a credit card that’s specifically used for financing medical bills. Examples of medical credit card issuers are CareCredit® credit card and the Wells Fargo Health Advantage® Card.
Medical credit cards may offer a no-interest introductory period from six months to as long as 24 months. However, it comes with some big caveats:
- Deferred interest can increase your cost of repayment by a lot. If you don’t repay the balance on your card before the introductory window expires, you’ll be charged interest from the original purchase date.
- Standard interest rates after the introductory period vary by card issuer. Sometimes, medical credit card rates are higher than a traditional credit card or medical loan. CareCredit® credit card’s standard interest rate, for example, the non-promotional rate is 26.99% APR while Wells Fargo offers a non-promotional rate of 12.99% Variable APR for purchases.
There are alternative options available to help you manage unforeseen medical debt. Before your account falls in the hands of medical debt collection, consider your options by speaking to your provider about your financial hardships early.