Is it illegal to send medical bills to collections? This is a question that a recent client just asked me, and I feel it’s worth discussing.
The simple answer is no, it is not illegal.
Healthcare providers, like any other service providers, have the right to seek payment for the services rendered. If you fail to pay your medical bills, they can legally transfer the debt to a collection agency. However, there are rules under the Fair Debt Collection Practices Act (FDCPA) that protect you from unfair treatment during this process.
But let’s take a step back and look at the bigger picture.
Many people face credit score issues for a variety of reasons. Some might overspend, make poor financial choices, or neglect their responsibilities. However, for others, their financial troubles stem from unexpected life events—things they never asked for or wanted.
For example, a sudden accident or severe illness can lead to overwhelming medical bills, leaving them scrambling to make ends meet.
In such cases, the damage to their credit is not due to irresponsibility but circumstances beyond their control. If you find yourself in this situation, it’s important to understand your rights and the steps you can take to minimize the impact on your financial health.
Here’s what you can do:
Understand What Medical Debt in Collections Means
When you don’t pay a medical bill for a certain amount of time—usually 90 to 180 days—the healthcare provider may send your debt to a collection agency. This means the doctor’s office, hospital, or clinic no longer tries to collect the money from you.
Instead, the collection agency takes over and works to get the payment.
Why Does This Happen?
Healthcare providers often don’t have the time or resources to keep chasing unpaid bills. So, they sell or transfer the debt to collection agencies to focus on running their practices. This is a common practice in the U.S., where nearly 1 in 5 adults have medical debt in collections, according to a 2022 report from the Consumer Financial Protection Bureau (CFPB).
The Reality Behind Medical Debt
- Massive Impact: Around 58% of all debts in collections in the U.S. are related to medical bills.
- Unexpected Costs: Many people don’t plan for large medical expenses. A survey by the Kaiser Family Foundation found that 2 in 3 adults with medical debt didn’t expect their bills to be as high as they were.
- Stressful Transfers: When debt goes to a collection agency, you’ll likely start getting AFNI Collection phone calls, letters, or even emails asking for payment.
What Happens When Debt Goes to Collections?
Once your debt is in collections, you can’t usually pay the healthcare provider directly. You’ll need to deal with the collection agency instead.
But don’t panic—understanding how this process works can help you take the right steps to address the situation.
Transfer of Responsibility
Once your debt is sent to collections, the collection agency becomes the primary contact for resolving the bill. They will start reaching out to you—often through letters, phone calls, or even emails—to request payment. The healthcare provider will likely no longer accept payment directly for the debt, as they’ve sold the rights to collect it.
Communication and Negotiation
Collection agencies are required by law to follow rules under the Fair Debt Collection Practices Act (FDCPA). This includes providing clear details about the debt and respecting your rights as a consumer, such as not harassing you or calling at unreasonable hours.
Credit Reporting Impact
This is where it gets serious. Once a medical debt is in collections, it can eventually be reported to the credit bureaus—Equifax, Experian, and TransUnion—and appear on your credit report. Historically, this could happen soon after the debt was sent to collections, but recent changes offer consumers more leeway:
The major credit bureaus now provide a 12-month grace period before reporting medical debt in collections. This means you have a year to resolve the issue before it impacts your credit score.
Additionally, as of July 2022, paid medical collection debts are no longer included on credit reports. If you settle the debt, it won’t remain as a negative mark on your credit history.
Why Medical Debt is Different
Medical debt differs from other types of debt, like credit card balances or personal loans, for several reasons:
Unexpected Nature: Medical expenses often arise from emergencies or unforeseen events, unlike discretionary spending that you control.
Insurance Complications: Insurance coverage may be delayed, denied, or misapplied, leaving you with a bill you didn’t anticipate.
Negotiation Opportunities: Unlike most debts, medical bills are often negotiable. Many healthcare providers and collection agencies are open to reduced settlements or payment plans.
Is It Legal to Send Medical Bills to Collections?
Yes, it is legal to send medical bills to collections under federal laws like the Fair Debt Collection Practices Act (FDCPA) and the Health Insurance Portability and Accountability Act (HIPAA). These laws allow healthcare providers and collection agencies to pursue unpaid medical bills, but they impose strict rules to ensure the process is fair and respectful.
Healthcare Providers Role: Why Bills Go to Collections
Healthcare providers typically wait 90 to 180 days before sending unpaid bills to a collection agency. This delay isn’t arbitrary—it’s designed to give patients time to:
Resolve Insurance Issues: Mistakes in insurance billing or delays in claim processing can leave balances unpaid. Providers often allow time for these problems to be fixed.
Set Up Payment Plans: Many providers offer installment plans or financial assistance programs to help patients manage their bills.
Communicate with the Provider: Patients may use this window to clarify billing errors, request itemized bills, or negotiate charges.
However, if no payment is made or no communication occurs, providers may transfer the debt to a collection agency to avoid further losses. For providers, collections are often a last resort after exhausting their options to recover payments.
Collection Agencies Legal Boundaries
Once a medical bill is transferred to a collection agency, the agency must follow specific rules set by the FDCPA, which protect consumers from abusive practices.
No Harassment or Threats
Debt collectors are prohibited from harassing you, threatening you with arrest, or using obscene language. They must also avoid contacting you at inconvenient times, such as before 8 a.m. or after 9 p.m., unless you explicitly agree. If you feel that a debt collector is crossing these boundaries, you may be experiencing credit collection harassment. To understand more about what constitutes harassment and how to handle it, check out this detailed guide: What Is Credit Collection Harassment and How to Handle It.
Knowing your rights under the Fair Debt Collection Practices Act (FDCPA) is essential to protecting yourself from unlawful practices.
Honesty Is Required
Collectors must provide truthful information and cannot misrepresent the amount owed or pretend to be someone they’re not, such as a lawyer or government agent.
Proof of Debt
If you request proof of the debt in writing, the agency must provide documentation showing the amount owed and how it was calculated. This step helps ensure you’re not being charged for something incorrect or already paid.
Your Right to Dispute Medical Debt
If you believe the medical bill sent to collections is inaccurate, inflated, or not your responsibility, you have the right to dispute it under federal law.
Request Validation
Within 30 days of the first contact from a collection agency, you can ask for proof of the debt. They must provide details such as the original creditor (healthcare provider) and the amount owed.
Check for Errors
Common billing mistakes include duplicate charges, insurance denials that should have been covered, or services you didn’t receive.
Submit a Dispute
If you identify errors, you can dispute the debt with the collection agency and the credit bureaus. The agency must pause collection efforts until the dispute is resolved.
Good Read: How to Dispute Errors on Your Credit Report with a 609 Letter
Why These Laws Matter
The legal framework around medical collections ensures a balance between healthcare providers' need to collect payments and patients' rights to fair treatment. Without these protections, consumers could be subject to aggressive, unregulated debt recovery practices that cause unnecessary stress and financial harm.
Understanding these rights can help you respond appropriately to a medical bill in collections. Whether it involves disputing a mistake or negotiating a payment plan, knowing the law empowers you to protect your financial well-being while addressing the debt.
Steps to Take When Medical Debt is in Collections
Dealing with medical debt that’s gone to collections can feel overwhelming, but it’s important to remember that you have options and rights. By approaching the situation strategically, you can minimize the damage to your finances and credit score while resolving the debt efficiently.
Here’s a step-by-step guide to help you regain control.
Step 1: Understand the Timeline
When you first receive notice that a medical bill has been sent to collections, it’s critical to understand the timeline. Medical debt doesn’t appear on your credit report immediately. Under recent changes to credit reporting rules, the major credit bureaus—Equifax, Experian, and TransUnion—now wait 12 months before adding unpaid medical debts in collections to your report.
This grace period gives you time to:
- Resolve the debt by paying, negotiating, or disputing it.
- Protect your credit score before the debt is reported.
Start by noting the following:
- Date of service: When the healthcare was provided.
- Due date: When the original bill was due for payment.
- Collection date: When the bill was transferred to collections.
Having a clear understanding of these dates will help you track deadlines and prioritize actions.
Step 2: Verify the Debt
Mistakes in medical billing are surprisingly common. Before making any payments, you should validate the debt to ensure it’s accurate and legitimate.
Common Errors to Look For:
- Billing mistakes: Duplicate charges or incorrect amounts.
- Insurance mishandling: Bills that should have been covered by insurance but weren’t due to errors or delays.
- Incorrect debt ownership: Sometimes, debts are mistakenly attributed to the wrong person.
How to Verify the Debt:
- Request a debt validation notice: Within 30 days of receiving a collections notice, ask the agency for proof of the debt. This document should include the amount owed, the original creditor (healthcare provider), and details about the service provided.
- Compare records: Check the validation notice against your medical bills, Explanation of Benefits (EOB), and any correspondence from your insurance company.
- Correct discrepancies: If you find any errors, contact the collection agency, healthcare provider, or your insurance company to resolve them.
Step 3: Communicate With the Collection Agency
Once you’ve confirmed the debt is accurate, it’s time to engage with the collection agency. While the idea of talking to a debt collector may be intimidating, staying calm and proactive can make all the difference.
Tips for Communication:
- Keep everything in writing: Whenever possible, request written communication to maintain a clear record. This protects you from miscommunication and provides evidence of agreements.
- Ask about payment options: Many collection agencies are open to debt restructuring or even reducing the total amount owed.
- Negotiate the debt: Don’t hesitate to propose a lower settlement amount. Start with an offer lower than what you can afford and work toward a mutually acceptable figure. For example, if you owe $1,200, you might offer $600 and settle for $800.
Step 4: Protect Your Credit
Even though medical debt is different from other types of debt, it can still harm your credit score if left unresolved. Fortunately, recent rule changes offer consumers better protection.
Strategies to Safeguard Your Credit
1.Pay the debt within 12 months: Use the one-year grace period before medical debt is reported to credit bureaus to address the balance.
2.Request removal after payment: Once you pay the debt, ask the collection agency to remove it from your credit report through a “pay-for-delete” agreement.
3.Dispute inaccuracies: If incorrect information appears on your credit report, file a dispute with the credit bureaus. Even small errors can negatively impact your score, so review your report carefully.
Step 5: Seek Legal Help If Necessary
If you believe your medical debt is unfair, inaccurate, or if you’re dealing with aggressive collection tactics, consulting a lawyer can be a smart move. Medical debt issues often involve complex billing systems and legal frameworks, making professional guidance invaluable.
In particular, if your debt stems from injuries caused by an accident or malpractice, you may have grounds to pursue compensation. In such cases, consulting Richmond personal injury attorneys can provide you with the legal expertise needed to navigate both the medical billing and liability aspects of your situation.
How Legal Help Can Assist
Identify Billing Errors:Medical bills often contain mistakes, such as duplicate charges or services you didn’t receive. Lawyers with experience in medical billing disputes can review your charges, spot errors, and negotiate corrections with healthcare providers.
Negotiate With Agencies: Debt collectors are often willing to settle for a reduced amount, but negotiating with them can be intimidating. Attorneys have the knowledge and experience to negotiate effectively, securing better terms or reducing the total debt owed.
Defend Against Lawsuits: If a collection agency sues you for unpaid medical debt, legal representation is crucial. A debt consolidation attorney can protect your rights, present evidence of errors, or negotiate a resolution to prevent further legal consequences.
Seeking legal help not only provides clarity but can also help you explore additional avenues to address your debt. Whether you’re disputing a bill or seeking compensation for an accident, having the right legal support can make all the difference.
Step 6: Explore Financial Assistance Programs
Many hospitals and healthcare providers offer financial assistance programs to help patients struggling with medical bills. These programs, often called charity care or hardship plans, can reduce or even eliminate the debt for eligible individuals.
How to Apply:
Contact the provider: Reach out to the billing department to inquire about assistance programs.
Gather documentation: Be prepared to provide proof of income, expenses, and any financial hardships.
Follow up persistently: If your first request is denied, don’t give up. Hospitals often have multiple levels of review, and persistence can pay off.
Step 7: Create a Payment Plan
If financial assistance isn’t an option, a payment plan can help you tackle the debt without overwhelming your budget.
How to Structure a Plan:
List your expenses: Write down essential costs like rent, utilities, and groceries.
Set a budget: Determine how much you can realistically afford to pay each month toward the debt.
Negotiate terms: Most collection agencies are willing to work with you to set up affordable installments.
Step 8: Learn From the Experience
Medical debt can be a wake-up call to improve financial preparedness and avoid future problems.
Preventive Measures:
Understand your insurance: Review your plan’s coverage and ask for cost estimates before receiving treatment.
Save for emergencies: Build an emergency fund to cover unexpected medical expenses. Aim to save at least three to six months’ worth of expenses.
Negotiate early: Before a bill goes to collections, contact your provider to discuss discounts or payment plans.
Conclusion
Dealing with medical debt in collections may seem daunting, but it’s manageable with a clear plan. Start by understanding the timeline, verifying the debt, and communicating with the collection agency. Take advantage of the 12-month reporting grace period to protect your credit, and don’t hesitate to seek legal or financial assistance if needed.
Remember, every step you take brings you closer to resolving the debt and regaining control of your finances. With patience, persistence, and the right approach, you can overcome this challenge and emerge stronger on the other side.
If you need expert help with repairing your credit or navigating the process, don’t hesitate to reach out to ASAP Credit Repair USA. Our team of professionals is here to assist you in restoring your financial health and guiding you through every step of the process. Visit ASAP Credit Repair USA to get started today!