What Happens if You Don’t Pay Medical Bills

Letting your medical bills go unpaid can bring serious consequences like harming your credit score. Learn how to cover medical bills to avoid it.

Millions of Americans hold a significant amount of medical debt. Even if you have insurance, you might one day find a bill in your mailbox for something that wasn't covered. If you can't immediately pay, you might find yourself in the same situation as many others -- dealing with a collection agency and trying to avoid financial damage. Below is a quick walkthrough of what you may deal with if you are unable to pay your medical bills.

Step 1: Letters and Contact

In most cases, your problems will start with the business to which you owe money. Dealing with a hospital and a doctor's office are each a little different, but they tend to follow a fairly similar formula. In both cases, you will be made aware of the fact that you owe money. Both organizations will start by assuming that you know what you need to pay, so you can either contact them by phone or by mail to make your payments. If you're able to pay them, your contact with the company will end, and then you will be able to move on.

If you aren't able to pay, you should expect to hear from the organization again. Letters will generally be sent out reminding you to contact the company first. When that doesn't work, you'll generally be notified that you have incurred some kind of late penalty. Should you continue to ignore the communications, you will likely get a notice that your bill will be sent to a collections department or that the company will pursue a legal remedy.

It's important to note that most medical organizations are more than willing to work with you during the first thirty to ninety days that you are late with your bills. Hospitals, in particular, tend to find it most important that you are paying something, even if it will take you years to pay off your debts. Private practices tend to want significantly larger payments, but they are usually willing to work with patients in order to come up with a payment schedule that won't be too disruptive. In most cases, the office is more concerned about getting paid something rather than losing out on everything that they are owed. Once you pass outside of the grace period, though, you will have to deal with collectors that are both significantly less motivated to help you and significantly less friendly in their attempts to get their money.

Consequences

The most common consequence of failing to pay a medical bill at this stage is being unable to see your regular doctor. While hospitals are required to treat you even if you have an outstanding balance, private doctors will often refuse to see patients who still owe them money. This can be very problematic for people who need medication refills as well as for those who have an urgent need to see a doctor. If you don't pay, you'll usually get stopped before you can even check in for your appointment.

It should also be noted that some doctors skip the next step and go directly to court. These doctors either work directly with lawyers or have enough in-house staff to pursue your debt on their own. If this applies, you can expect to see a hit to your credit score shortly followed by a letter from an attorney. This is often a worst-case scenario, as your timeframe for paying your bills will be greatly shortened. You should be thinking about how to cover medical bills before you get to this point.

Step 2: Collections

At some point, the doctor's office or hospital will stop trying to collect money from you. This does not, however, mean that you are in the clear. Instead, it means that the medical agency has decided that it's no longer worth its time to try to get the money directly from you. Instead, it will sell off your debt to a third party in an attempt to get at least a portion of what it owes back. While dealing with the office or the hospital is usually fairly easy, dealing with a collection agency is different.

When you deal with a doctor's office, you're still dealing with a place that is primarily in the business of helping sick people. As such, most hospitals or offices have plans in place to help those who are not able to pay. These businesses know what happens if you don’t pay medical bills and they are generally willing to work with you in order to ensure that this does not happen.

The collection agency, however, is simply in the business of collecting debts. They do not offer generous payment plans, nor are they willing to forgive debts. These companies have all the time in the world to collect from you simply because that is what they do. These agencies do not let people slip through the cracks, nor do they decide that a debt is not worth their time. They make sure at least one person remains focused on getting what the company is owed, largely because doing so is the only way that the collection agency will be able to stay in business.

When you hear horror stories about what happens if you don't pay a medical bill, you're usually hearing stories from people who have to deal with a collection agency. Most of these agencies start relatively slowly, sending you a message in the mail and calling perhaps once a week. If you do not pay, though, you can expect to hear from the company more often. Even the most reputable agencies will call you at home multiple times a day, hoping to get in contact. You may also get phone calls at work, especially if you don't pick up your own phone.

Consequences

When your medical debt hits collections, you'll start to experience a number of consequences. A few are similar to what you'll find when your debt is held by the medical company itself, but a few are significantly more problematic. When you have an account reach the collection agency, you will reach the point at which you're dealing with long-term consequences. It's very important that you try to rectify the situation before the most severe damage is done.

The primary issue noted by most consumers is that your credit score will start to drop. Each account in collections will drop your score, and the longer an account stays unpaid, the worse your score will look. It's vitally important that you get help covering medical bills before you hit this point, as your ability to take out online personal loans for good credit or even qualify for certain types of housing will be put in jeopardy. Remember, your credit score will also start to drop if you make a payment arrangement with the collection agency and you fail to make your payments on time.

In addition to a lowered credit score, you'll also start having to pay fees. If your doctor’s office attached any late fees to your account, this amount would be added to the debt owed to the collector. The collector will often also tack on their own fees, ranging from fees for late payments to "convenience fees" added for those who choose to pay online. This means that not only will you be making payments on your debt, but your debt will technically grow even as you attempt to pay off what you owe. The longer your pay-off period, the better the chance that you'll end up owing more money.

Step 3: Court

The final step is usually going to court. Whether the medical organization or the collection agency brings you to court is irrelevant as the process will be almost identical. You will start by receiving a final letter that demands your full payment. If you fail to submit your full payment by the due date, you will then receive either a certified letter or a summons from the court for your court date. This may or may not include the contact information from the attorney that the collection agency or medical organization will be using for the suit.

When you get the letter from the attorney, the clock starts ticking. In some cases, you will be able to deal with the lawyer in the same way you would a collection agency; e.g., making payments over a brief period, usually with extra fees attached. In other cases, though, you will have the choice of either paying off the entire amount of your debt before the court date or going to court. In most cases, the former is preferable. Unfortunately, though, most people who are in this position cannot pay off their debts.

When you go to court, you will be in an adversarial proceeding. It is almost a certainty that you will end up having to pay something once you go to court. The only way to avoid this is evidence that you have paid off the debt, that the debt you are being asked to pay is not your responsibility, or that you have a written agreement with the holder of the debt. If none of these circumstances apply, the court will generally require you to pay what you owe to whoever brought you to court, generally with the addition of fees for the other side's attorney.

The good news is that many courts won't require you to pay it all back at once. You will be able to enter into a payment arrangement with the court, which can be less onerous than what the collections agency might have you pay, but it's also going to be based on what the court thinks you can reasonably pay. If you fail to make these payments, that's when some of the bigger problems start.

If you fail to pay what the court tells you to pay, the court will get its money. It will do so through garnishing your paycheck. A certain amount of what you owe will go directly out of your check and to the debt-holder. Depending on the state in which you live, you might also suffer other legal penalties that can lead to even more fees. You will also take another significant hit to your credit, and have to deal with reporting the fact that you have an outstanding civil judgment against you.

How to Pay Off Medical Bills

The best way to deal with the problem is to not get into it at all. Unfortunately, that's not realistic for many people. Instead, your goal should be to address the issue as quickly as you can and to pay off the debt as fast as possible. The faster you pay off the debt, the less time it will spend on your credit report and the less damage control that you will have to do.

Try to catch these debts early. Contact the medical office as soon as possible to start discussing payment plans. If you can't make the payments they want, you'll need to start looking into borrowing money. If you can borrow money and make lower payments than those you'd need to make on your medical bills, you'll still end up with a net positive result. Do your research, though, to make sure that you're borrowing from the right company.

If you are in collections, you have to move quickly to save your credit score. It takes time for even a paid-off account to fall off your bills, so getting help paying medical bills in collections can be a good idea. Look into borrowing, whether privately or through an online personal loan, and don't be afraid to talk to the collection agency about the possibility of getting a discount for making a lump-sum payment.

Medical debt can be difficult to deal with, but it's a debt that isn't likely to be discharged. Try to pay what you can as quickly as you can and make sure that you don't ignore the problem. If you are willing to answer the calls and work with the people to whom you owe money, you stand a better chance of making it out of this process with your credit score intact and your bank account in a reasonable state. Don't be afraid to reach out for help when you need it. Solving this problem is one of the most important things that you can do for your financial health. 

Ana-Maria Sanders   LoanStart Marketing Manager

Personal Finance

Ana-Maria Sanders has always enjoyed helping people manage their finances. She has fond memories of helping her grandma cut offers out of the newspaper. As the main content writer and marketing manager for LoanStart, Sanders continues to help guide people through the complicated world of personal finances. She especially likes teaching people how to borrow and pay back loans.