Does medical debt go away when the statute of limitations expires, when you file bankruptcy, or after you die?
The medical debt statute of limitations time bars collection agencies from filing a lawsuit. However, the rules work differently than you might imagine.
Bankruptcy can clear or reorganize your medical bills and give you a fresh start or extra breathing room. However, filing Chapter 7 or 13 has other consequences.
Even the death of a spouse or parent does not eliminate the obligation to pay. The laws in your state determine what happens next for insolvent estates.
Statute of Limitations Medical Debt Collections
A statute of limitations (SOL) is the length of time a party has to take legal action. When it comes to medical debt, the dentist, doctor, hospital or collection agency has a certain amount of time to file suit in order to collect the outstanding amounts.
The length of the time bar depends on the state where you live and how you respond when an agency contacts you about the debt.
The start date for medical debt collections statute of limitations is the date of your last payment. This starts the clock ticking but also creates opportunities for consumers to accidentally reset this vital legal protection against lawsuits. The rules are unique in each state.
- Making any payment can reset or revive the SOL
- Acknowledging that you owe the debt can reset the SOL
Consult an attorney in your state for legal advice on ways to avoid restarting the SOL.
Statutes by State
Statutes of limitations vary by the type of contract and the state where the debtor resides. Most medical bills represent written contracts. Many hospitals and doctor offices require new patients to sign a medical patient financial responsibility form, which serves as the written contract.1
- Oral contracts – a verbal agreement to pay back the money
- Written contracts – a document signed by you including terms and conditions
- Promissory notes – a written agreement with a specified interest rate, and timeframe
- Open-ended contracts – has a revolving balance that you can repay and borrow again
How long can a medical debt collector legally pursue old debt? The statute of limitations does not extinguish obligations after it expires. The creditor is time-barred from filing a lawsuit to compel payment.2
You still owe the money. Collection agencies can attempt to collect medical debt indefinitely unless discharged through bankruptcy – see below.
After the SOL runs out, they just have one less tool in their toolbox to compel payment – taking you to court. However, they may still have another trick up their sleeve – reporting the amount owed to the credit bureaus.
Time on Report
The statute of limitations has nothing to do with how long medical debt collections stay on your credit report. All negative information automatically falls off your report 7 years after the date of first delinquency. The consumer reporting agencies must adhere to several federal regulations – not 50 different state laws.
The impact on your credit score can vary depending on whether your insurance company pays the outstanding balance. Also, any lawsuits resulting in a civil judgment will drive your score lower for a longer period. Filing bankruptcy has a bigger negative effect.
The statute of limitations does not erase your obligation to pay any purchased debt. You still have to pay if your medical debt is sold to another company. It is common industry practice for agencies to sell and/or buy portfolios of aged receivables – usually for pennies on the dollar.
Pleading no contract as a negotiating tactic does not help your case. The new company purchased the legal right to pursue collections. You now owe money to this other organization.
Medical Debt After Death
What happens to medical debt after the person dies? Does it go away? Can the collection agency continue to pursue payment? The answer depends on the assets in the estate, the legal relationships of beneficiaries, and the state laws that may apply. Whether creditors attempt to enforce certain laws is a wild card.
Consult an estate or probate attorney licensed in your state for definitive answers and guidance.
The estate of the deceased is responsible for paying any leftover medical bills incurred while the person was still living. A solvent estate will have sufficient assets to satisfy all of these obligations and bestow a legacy to the beneficiaries according to instruction in the will.
An insolvent estate lacks the resources to retire all obligations. End-of-life assisted living, hospital, nursing home, hospice, and funeral bills can easily exceed the assets of the deceased. In this case, the executor distributes the remaining money to creditors according to a legal formula. The beneficiaries get nothing.
Are beneficiaries responsible for medical debts left by the deceased? This question matters only when the estate is insolvent – it has insufficient assets to repay the amount owed. The answer is – it depends. The laws in each state determine whether spouses and/or children inherit these obligations.
If your spouse dies, are you responsible for their medical bills? The answer depends on whether the married couple lived in a community property (less frequent) or common law state (more frequent).3
- Community property: the married couple share debts and assets
- Common law: each individual owns the assets and debts unless they are held jointly
For example, a widow would be responsible for the medical bills of her deceased husband if she lives in one of the nine common law states. Otherwise, she does not have to pay.
Who is responsible for medical bills of a deceased parent? In general, the children are not liable even if the estate is insolvent and the parent lived in a community property state. However, there are exceptions to every rule.
Filial support laws exist on the books in 29 states – although they are rarely enforced – until recently. Filial responsibility laws require children to support indigent parents.4 Contact an attorney if a nursing home or Medicaid wants reimbursement for past services under this legal argument.
Bankruptcy Medical Bills
Can you file bankruptcy on medical bills in order to clear away your obligations? Yes, you can include medical debt (along with credit cards, personal loans, and other outstanding balances) in a bankruptcy filing.5
However, the differences between Chapter 7 and Chapter 13 determine whether the obligation goes away completely, or you simply restructure what you owe. Consult a bankruptcy attorney licensed in your state for definite answers.
A bankruptcy Chapter 7 discharge releases you from personal liability for most of your unsecured debts (including medical) without the need to pay back balances through a repayment plan. It provides a fresh start.
- A trustee sells all of your non-exempt property to pay creditors.
- Filing places an automatic stay on your accounts. This stops creditors from pursuing collections efforts. The stay continues if the judge grants a discharge.
- You must meet income means testing requirements. This option works well for people with low incomes and few assets
A bankruptcy Chapter 13 reorganizes your personal liabilities for unsecured debt (including medical) and sets up a payment plan to repay at least a portion of what you owe. It provides wage earners time to breath.
- Keep all of your exempt property such as a house, car, or retirement fund
- Repay creditors an amount equal to the value of non-exempt assets
- Creditors must discontinue collection efforts during the repayment phase
- People who earn too much money to meet the income means testing choose this option
- State-by-State List
- Federal Trade Commission
- Community Property States
- Filial Support Laws
- US Courts Bankruptcy Basics
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