What Happens When You Don’t Pay Medical Bills?

What happens when you do not pay medical bills?

The consequences are minor at first when you leave dental, doctor and hospital bills unpaid. Providers often wait for insurance companies to process claims paperwork.

However, the fallout grows severe very quickly after the provider refers your account to a medical collection agency.

First, your credit score may take a hit. Then, you may face a lawsuit and the prospect of wage garnishment and/or liens against assets.

Take steps to avoid these problems while you can.

Consequences of Not Paying Hospital or Doctor Bills

What happens when you do not pay hospital or doctor bills? You may not feel the consequences right away. Most patients have about 180 days before feeling any negative effects.

Most healthcare providers expect an insurance company to handle the bulk of the charges. The claims processing takes time. Meanwhile, you could negotiate a settlement or request assistance to avoid having your account sent to a collection agency.

Negotiated Settlement

Negotiating a settlement requires that you not pay your hospital, doctor, credit card, and other unsecured creditors. Third party debt settlement companies recommend consolidating all of your payments into an escrow account. This has two main benefits.

  1. Builds a balance for making a lump sum settlement offer
  2. Establishes financial hardship in the creditor’s eyes

Your doctor or hospital may ultimately choose to accept a small percentage as payment in full. The amount of time it takes depends on your ability to accumulate about 30% of your obligations into the escrow account.

Requesting Assistance

Requesting financial assistance instead of paying your doctor or hospital can stall or prevent a referral to a collection agency. Each provider has different rules for when they send accounts to collections. You might be able to find help from several places to stop this from happening.

  • Private companies run settlement programs and offer consolidation loans
  • Government agencies administer benefit for low-income families
  • Prescription drug programs offer copayment assistance and discounts
  • Charitable organizations help patients with serious illnesses

Consequences of Not Paying Medical Collection Agency

What happens if you do not pay the medical collection agency? The consequences come more swiftly and are far more severe once the doctor or hospital refers your account to a collection agency. While you will not go to jail, the agency may report the account to the credit bureaus and/or file a lawsuit.

Taking out a consolidation loan can help you avoid this chain reaction. Use the borrowed funding to stop the collection calls, bring the collection account to a paid status on your consumer report, and stop the lawsuit before the agency issues a legal summons.

Credit Report

Collection agencies can report your unpaid medical bills to the credit bureaus 180 days after the date of service. The agencies threaten this step in order to prompt payment on the account. It is often the first lever they employ.

Medical collection accounts on credit reports have significant and lasting repercussions.

  • Hurt your FICO or Vantage score by 100 to 200 points
  • Remain on your file for seven years counting from the date of first delinquency
  • Difficult to remove or dispute as the entries are legal
    • Disappear in health insurance plan ultimately pays
    • Insurance plans rarely cover 100% of charges

File Lawsuit

Collection agencies can file a lawsuit over unpaid medical bills. If successful, the court can issue a civil judgment whose outgrowth is far more painful. The judgment could result in a court order to garnish wages or place a lien against your personal property.

The statute of limitations (SOL) on medical debt time bars collection agencies from filing a lawsuit. Be careful to avoid resetting the SOL by making any payment or acknowledging that you owe the money. Respond to the summons to prevent a default judgment. The SOL does not eliminate your obligation to make payment.

Garnish Wages

The collection agency can garnish your wages for unpaid medical bills. Wage garnishment is the process of deducting money from your paycheck until the debt is retired. Hire a lawyer to protect your paycheck.

Your Social Security benefits are safe from garnishment over unpaid medical bills. The federal government legally permits this only for tax and student loan debts.

Lien on Property

The collection agency can also place a lien against personal property for unpaid medical bills. A lien is a legal right to keep possession of property belonging to another person until a debt owed is discharged.

  • A property lien against your house would come out during a title search when you tried to sell your home. The agency would take back a portion of the proceeds.
  • A bank levy provides the agency with a writ of execution to seize money in your checking or savings account.