Receiving medical treatment, especially emergency care or a hospital stay, can be extremely expensive in the United States Even with health insurance, you may end up with high out-of-pocket costs like deductibles, copays, and coinsurance that can quickly add up to thousands of dollars These costs put many Americans in a difficult financial position when the medical bills start arriving in the mail. But what actually happens if you don’t or can’t pay a hospital bill on time?
Unfortunately, ignoring medical bills or letting them go unpaid will not make them magically disappear. Hospitals, doctors, and other medical providers will pursue collection of unpaid debts and failure to pay will negatively impact your finances in several ways
Lower Credit Score
Like most other debts, unpaid medical bills can be reported to the credit bureaus if they are not paid after a period of time. This typically occurs after the original bill is 120-180 days past due. Once on your credit report, these unpaid medical debts will lower your credit score.
The degree of damage depends on the amount owed. A small medical bill that goes to collections may only reduce your credit score by a few points. But larger medical debts exceeding $1000 or more can cause a plunge of 50 points or more. A lower credit score makes it harder to qualify for loans, credit cards, mortgages, rental housing, utilities, cell phone plans, and more. Poor credit also leads to higher interest rates when borrowing money.
Debt Collection Calls and Letters
After a few months of nonpayment, medical providers will assign or sell the unpaid debt to collection agencies. Expect to start receiving phone calls demanding payment. Collectors may also send letters warning of additional actions if you do not pay up.
Under the Fair Debt Collection Practices Act, debt collectors cannot harass, oppress, or abuse you. But repeated calls can be annoying and the letters threatening. This hounding by collectors will continue until the medical bills are paid in full or settled for a lesser amount. Ignoring the problem won’t make it go away.
Wage Garnishment
One of the more serious consequences of unpaid medical debt is wage garnishment. If a court judgment is obtained against you for the unpaid medical bills, the collector can garnish your wages. This means they can legally force your employer to withhold a percentage of your paycheck and send it to them.
Federal law limits wage garnishment for most debts to no more than 25% of someone’s disposable earnings. But certain exceptions apply for child support, alimony, and federal/state tax debts. Garnishment will make meeting your other financial obligations much more difficult.
Property Lien
Your home, vehicles, bank accounts, business, and other assets can also be at risk if medical bills remain unpaid. Collectors may be able to place a lien on your property, which allows them to eventually force the sale or seizure of assets to satisfy the debt. It becomes very hard to sell a home with an existing medical lien. Your bank account funds could be frozen. A lien on your business assets could even force you into bankruptcy.
Bankruptcy
For some individuals, large medical debts combined with other financial factors leave them with no other option except to file for bankruptcy. While it may discharge medical bills, bankruptcy also ruins your credit for years to come and makes most types of borrowing extremely difficult or impossible. Many people lose assets like homes and vehicles to bankruptcy as well. It should only be considered as a very last resort if medical debt cannot be paid.
Jail Time
Being sent to jail for unpaid medical bills is rare and usually only happens if other legal options have been exhausted. Most states allow civil arrests in debt collection cases only if someone has defied a court order to pay. However, a few states like Arizona and Illinois have no such restrictions, so failure to appear in court or comply with payment orders could theoretically result in jail time.
Getting Help
If you are unable to pay medical bills in full due to financial hardship, communicate promptly with healthcare providers and utilize these options to avoid the above consequences:
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Request an itemized bill and verify that all charges are accurate. Negotiate lower costs if excessive fees or errors are found.
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Inquire about financial assistance or charity care programs which provide free or discounted services for those meeting income limits.
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Ask providers for no-interest or low-interest payment plans that allow you to pay what you can over time. Make sure to get any payment agreements in writing.
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Consult with a nonprofit credit counseling agency which can help negotiate debt reductions and set up affordable monthly payment plans.
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Consider debt consolidation loans or balance transfers to credit cards with 0% intro APRs as a last resort to pay off medical debts faster and avoid further interest charges.
While daunting, unpaid medical bills do not need to ruin your finances if you take action quickly to address the problem. Prioritize communication with healthcare providers to resolve discrepancies, seek assistance, set up installment plans, or discuss debt settlement options. This will mitigate the financial stress and avoid the worst consequences like wage garnishment, liens, bankruptcy, and collection harassment.
How does medical debt impact my credit score?
Owed medical debt can be reported to credit bureaus one year after you first miss a payment. Medical debt can lower your credit score, which can hurt your ability to get loans. Unpaid medical debt stays on your credit report for seven years.
In 2022, a voluntary policy was announced by the three major credit bureaus (Equifax, Experian, and TransUnion) to prevent some medical debt from being listed on your credit report and factored into your credit score:
- Paid medical bills should no longer be included on credit reports.
- Unpaid medical bills cannot be listed until the bill has not been paid for at least 12 months.
- Medical bills for $500 or less should no longer be included on credit reports.
If your credit report contains any these forms of medical debt, follow these instructions to dispute any errors.
If you feel your rights are being violated, seek help from the Consumer Financial Protection Board:
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What Happens If You Don’t Pay Medical Bills?
FAQ
What are the consequences of unpaid medical bills?
Do unpaid medical bills affect your credit?
What happens if I ignore medical bills?
What is the law on unpaid medical bills in Texas?
What happens if you don’t pay medical bills?
Before you give up on paying a medical bill you think you can’t afford, click or swipe to learn what can happen when you pay late or default on medical debt. When you don’t pay medical bills … If the hospital billing department is threatening to send your account to collections, pay attention.
Are You late paying your medical bills?
61% of Americans who have struggled to pay medical bills say they’ve been late making a medical bill payment. (Kaiser Family Foundation/New York Times) 33% say that the medical bills they’ve had problems paying are ones that built up over time, such as for treatment for chronic illness. (Kaiser Family Foundation/New York Times)
Why are so many people not paying medical bills?
In the U.S., many people are not paying their medical bills because they can’t afford them. According to data from the U.S. Census Bureau, 19% of American households could not afford to pay for medical care they received right away. Households with children are more likely than those without children to have unpaid medical bills.
What happens if a medical bill is unpaid?
When a debt collector contacts you by mail, phone, or other method about an unpaid medical bill, they must also send a debt validation notice within about 5 days. This letter should include: Once you’ve received this notice, you have 30 days to either dispute the debt or request more information.
What happens if a medical bill is overdue?
You may be contacted by a debt collector if your unpaid medical bill is so overdue that it ends up in collections. Sometimes, you will receive a final warning to pay before the debt goes to collections. Explore these related articles, suggested for readers like you. A debt collector’s job is to get a balance paid in full.
How can I avoid paying a medical bill if I don’t pay?
1. Check your EOB and bill for errors. When you get a medical bill in the mail, don’t assume that the amount it shows is the amount you have to pay. Billing and coding errors are quite common, and the only way you can avoid paying when you don’t have to is if you know how to spot these errors.