Have you or a loved one visited a doctor’s office lately? If so, you most likely used your health insurance to cover a portion of that bill. However, a portion of that bill is left for you to pay, or if you do not have insurance, you have the full bill to pay. The cost can be significant whether you don’t have insurance or you have a high deductible.
If you find yourself unable to pay off medical debt and your debt being referred to a collection agency, you are not alone. Experts say that 58% of debt pursued by third-party debt collectors are overdue medical bills. And in June of 2021, medical debt in the United States reached a staggering $88 billion. Do unpaid medical bills affect your credit? Yes-they do. You may not see it immediately since the reporting agencies give a 180-day grace period on reporting delinquent medical bills, but they will inevitably show up.
Medical debt and medical collection can be damaging to your credit. There are ways to remove the debt and the collection. Beginning July 2022, paid medical collection and debt under $500 should no longer appear on credit reports. (Medical Debt Credit Reporting Changes in 2022)This change is intended to provide relief to individuals (CFPB Estimates $88 Bilion in Medical Bills on Credit Reports)and assist them in focusing on their financial and personal well-being. Let’s take a look at a few steps to remove more significant debt and collections.
If you notice a medical debt or collection on your credit report, the first thing to do is check to make sure the debt is valid. Make sure that it does not contain inaccuracies, such as something that your insurance company has already paid, or that isn’t yours. If you find that the debt is invalid, dispute the account. A dispute also applies if the debt is less than six months old. Medical debt is not supposed to appear on your credit as a collection until they have been in collections for six months or 180 days.
You may also speak to your insurance company and see what changes can be made to the bill to increase the amount that they pay. It can be time consuming to be the middleman between your insurance and your medical provider, but the possibility of lowering your debt may be worth it.
Gather as much evidence as possible when filing a dispute. Even the slightest inaccuracy can be significant. Payment records from your health insurance, billing statements, and receipts are helpful. Once you have supporting documentation, send a dispute letter to the credit bureaus reporting the error. Be sure to specify the error and ask that it be removed.
Paying off your medical debt is the simplest way to remove the debt. Call the debt collector or medical provider and negotiate a reduced payoff settlement or payment plan, and request that the collection be deleted from your credit. To use this pay-for-delete method when settling your medical debt, send the collector a letter asking them to provide written confirmation that they will delete your collection from your report once you pay the agreed amount.
Remember that paid accounts do not affect your credit score in the newest credit scoring models (FICO (, VantageScore 3.0, and subsequent models). But not all lenders have upgraded to the latest FICO scoring model, so deletion is a crucial step in the negotiation process. A word of caution, not all collection agencies will agree to delete the account if paid off at a reduced rate.
If you cannot pay off your entire debt in full, try to pay it down to under $500. After January 1, 2023, medical collections under $500 will be removed from consumer credit reports. (Medical Debt Credit Reporting Changes in 2022)
Filing for bankruptcy will likely cause your credit to dip, but the effects may not be as long-lasting as the alternatives. Medical providers or collection companies may sue to collect the unpaid bills. You could face wage garnishment, bank levies, or a judgment lien against your property. Filing for bankruptcy can not only wipe out your medical debt but may put you on the road to financial recovery sooner rather than later. We recommend seeking the advice of a bankruptcy attorney to determine how to protect your assets and discuss which path best suits your situation.
Chapter 7 may be an option depending on your income or have assets with little to no equity. You are not required to have a certain amount of debt to file. Medical debts, like other unsecured debt, may be discharged with a Chapter 7 bankruptcy.
Not every person qualifies for a Chapter 7 bankruptcy, you may be able to file for Chapter 13 bankruptcy. Chapter 13 allows a debtor to pay a portion of the unsecured debt, including medical debt through a plan of repayment. After the completion of the plan of repayment the Debtor will receive a discharge of the debt or wipe out the remaining portion of the debt. As with any debt or collection, there are options to eliminate or reduce the debt. Seek the advice of an experienced attorney with any questions you may have. Whether it is as simple as negotiating or reducing the debt via payment, or seeking bankruptcy to eliminate a substantial medical debt, remain proactive and seek help. Don’t let yourself become overwhelmed in a sea of collections. Please contact us for assistance and don’t face this process alone.
Miller, Hollander & Jeda’s founding attorneys began practicing in the early 1970s before putting down roots in the area and joining forces in 1992 to create the Naples, Florida, law firm that bears their names. Since its inception, Miller, Hollander & Jeda has focused on bankruptcy. The goal of our attorneys and our experienced staff, established at the outset and built upon year by year, is to use our extensive knowledge of bankruptcy law to answer the complicated questions you have regarding your financial trouble and help you solve your problems. We take pride in helping clients get a fresh start.
CFPB Estimates $88 Bilion in Medical Bills on Credit Reports. 01 March 2022. <https://www.consumerfinance.gov/about-us/newsroom/cfpb-estimates-88-billion-in-medical-bills-on-credit-reports/>.
Medical Debt Credit Reporting Changes in 2022. 31 March 2022. <https://gfsgroup.org/blog/the-medical-debt-reporting-credit-reporting-policy-changes-in-2022>.