Reader Question: Medical Bill In Collections With No Warning

Published

April 5, 2011

Gerri Detweiler focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.

A reader sent in a question about a medical bill that went to collections without her knowledge:

I received a notice that I was in collections for a medical bill. I never even knew this bill had gone unpaid! I had paid all the bills I received for this procedure. I called the hospital and they told me there was nothing I could do about it. This is going to ruin my credit scores. What can I do?

This is a very common practice, unfortunately. A 2003 Federal Reserve study found that over half of all collection accounts on credit reports are due to medical collections. Unfortunately, there is no requirement under federal law that you be notified before the bill is placed with a collection agency, nor any requirement that you be given the opportunity for you to pay it before it affects your credit. If it’s inaccurate, you can dispute it after the fact (with both the credit reporting agencies and the collection agency), but by then the damage may have already been done.

I have two suggestions:

1. Ask the collection agency not to report it if you pay right away (assuming you can). If so, get that agreement in writing before you pay. This happened to me once over a bill I was disputing because I thought the insurance company should have covered it. When the collection agency called me, I agreed to pay it that day if they agreed not to report it. They did, I did, and it never hit my credit. There is no guarantee this will work for you but it’s worth a try.

[Consumer Resource: Statute of Limitations On Debt Collection by State]

2. Complain to your elected officials in Washington (senate.gov and house.gov). Ask them to support the Medical Debt Relief Act, which would remove medical collections from credit 30 days after they are paid. Go ahead and file a complaint with the Consumer Financial Protection Bureau as well.

Medical Bill in Collections (con’t.) »

Medical Bill in Collections (cont.)

A Second Opinion

I wanted to make sure I wasn’t missing anything in my answer, so I turned to attorney Robert Brennan for a second opinion. He has extensive experience in debt collection and credit damage lawsuits, and he shares advice on his website SoCalCreditDamage.com. (He’s also the coauthor of the California edition of my ebook, Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.) Here’s what he said:

In this situation, she likely signed an agreement making herself personally liable for any charges not covered by insurance when she received the medical treatment. So, she’s most likely on the hook.

Most debt collectors have an “insurance desk”, where they have a specialist collector who specifically tries to get insurance coverage for the debts. Usually these individuals are dealing with medical insurance companies. If she had any kind of insurance, including possible public benefits, she should first contact the “insurance desk” at any involved debt collector and put them to work trying to collect from the insurance company.

My third prong of attack would simply be to negotiate. Obviously make the debt collector prove the debt: have the collector provide the documentation showing that your client actually incurred it. If not, then she did not incur it and it should not be credit reported. If she did incur it, in writing, then she should probably work out a repayment plan, unless, of course, there is insurance or it’s past the statute of limitations.

[Related Article: Medical Relief Act: Why I’d Vote For It]

Beyond that, have your client look to her state’s statute of limitations. In California, it’s four years for breach of written contract, two years for breach of oral contract. It varies state to state. Her debt may be past the statute of limitations, in which case she does need to pay it legally. However, recall that creditors and debt collectors can report a delinquent debt for seven years + six months following the date of first delinquency (with the original creditor), so the statute of limitations would not prevent the credit reporting.

You may also want to read Credit.coms article, Medical Bill Nightmares, for more information on how to handle medical bills you can’t afford to pay.

Have you had a medical bill sent to collections without warning? If so, please share your story with us in the comments section below.

Image by reegone, via Flickr