Nearly one in five Americans has medical debt in collections, on average owing close to $2,500 each, according to a new study in the Journal of the American Medical Association (JAMA). So if a debt collector calls, know that you’re just one of hundreds of names on that day’s call list.
More importantly, know that you have options. Here’s a quick list of steps you can take to protect your rights and achieve the best possible outcome.
It won’t stop them from ruining your credit or taking you to court.
Under the Fair Debt Collection Practices Act (FDCPA), you have the right to receive a written notice telling you how much you owe, the name of the creditor, and what to do if you believe the debt is incorrect.
Healthcare providers typically try to collect debts through their billing departments or third-party agencies. In either case, the provider will be the creditor. Less commonly, hospitals sell patient debts to a buyer. If the creditor is not the hospital where you were treated but a “capital firm” or something corporate-sounding, your debt probably has a new owner.
“The minute you get that letter, you contest the debt—whether it’s real or not,” said Jerry Ashton, a former debt collector who co-founded the nonprofit RIP Medical Debt.
Under the FDCPA, you have 30 days to dispute a debt before it’s presumed legitimate. Contest it in writing via certified mail. Ask to see the healthcare provider’s itemized bill to ensure the services were coded property and that you weren’t overcharged. (See healthcarebluebook.com or fairhealthconsumer.org for a price guide to common services and procedures.)
The FDCPA requires debt collectors to verify debts upon request. Always ask; you might get lucky. Debt collectors might not be able to locate the documentation they need—a copy of the original bill, for starters—especially if the debt has been sold.
Statute of limitations:
States limit the time creditors have to sue over medical debts, usually between three and six years. In some states, however, making a partial payment or acknowledging the debt resets the clock.
Medical debts cannot be reported to credit agencies until 180 days after they’ve been sent to collections, and they come off your credit report seven years after that. (In some states, a partial payment or debt acknowledgment restarts the credit-report clock, too.) New credit rating formulas downplay the impact medical debt has on credit scores, but mortgage lenders don’t always use these new methods.
Debt collectors can’t call you before 8 a.m. or after 9 p.m., or call repeatedly. They can’t speak with anyone other than you or your spouse about your debt. They can’t threaten to seize your property or have you arrested. They can’t make false statements or use obscene language. They can’t contact you at work after you’ve told them not to. They can’t contact you at all after you’ve asked them to stop. (The CFPB has sample letters you can send to debt collectors who are harassing you. You can submit a complaint here.)
Don’t ignore a court summons. You’ll either have 20 or 30 days to answer the complaint. Your defenses might include:
Failure to answer a summons will lead to a default judgment against you, allowing the healthcare provider to garnish your wages. What and how much providers can garnish depends on which state you live in. However, medical debt holders cannot garnish Social Security, Supplemental Security Income or veterans benefits, military annuities or survivors’ benefits, federal student aid, federal emergency disaster assistance or federal employment benefits.
If you have the resources to retain an attorney, do so; if not, contact your area legal aid office.
With old debts, talk to a lawyer whenever possible before negotiating with a collector or making a payment. (If you can’t afford a lawyer, contact your local legal aid office.) Don’t be tricked into exposing yourself to unnecessary legal risk.
When you negotiate, don’t get bullied into paying more than you can.
It helps to be proactive. Nonprofit hospitals are required to have financial aid programs to help people afford care. You don’t have to wait to hear from a debt collector. As soon as you receive a bill from the hospital, contact the billing department to see if you qualify for assistance.
If the provider has already assigned the debt to a collections agency, you have leverage, former ProPublica reporter Marshall Allen writes in his new book Never Pay the First Bill. The provider is worried you won’t pay. The agency, which works on commission, wants cash and will be as lenient with you as its contract allows. (If you are receiving bills from both the provider and its debt collector, contact the provider about making payments; it owns the debt.)
If your debt has been sold, the buyer bought it cheap—probably 3 percent of its face value. Even if you settle for an 85 percent discount, the buyer profits handsomely.
There’s one thing to keep in mind, Ashton says: Debt collectors aren’t monsters.
“They are as human as you are,” Ashton said, “and they’ve got a job to do. And you want to work with them to make sure that the [most] equitable conclusion is reached—which for you is paying nothing.”
If all else fails, there’s bankruptcy.
That’s OK. Medical debt isn’t a moral failing, and bankruptcy is no cause for shame, says Ashton, who has twice filed for bankruptcy himself.
“The people who should be ashamed are the ones who have set up a system that causes good Americans to go into bankruptcy or lose sleep or cut their pills in half,” said Ashton, whose new venture, Let’s Rethink This, promotes companies developing innovative solutions to big challenges.
Jeffrey Billman is an award-winning investigative journalist based in North Carolina.
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