Medical debt is a universal struggle that millions of Americans face each day. Between inadequate or no insurance at all, and the steadily increasing cost of healthcare, medical debt adds up over time to the point where many feel like they’re drowning in it. People facing medical debt often cut spending on food, clothing, medications and other necessities, while simultaneously draining their savings or borrowing money from friends and family.
If you’re currently struggling to manage unpaid medical debt, understand that you’re not alone. Medical debt is more common than you may think, with over $140 billion in unpaid medical debt affecting millions of Americans. What’s more, medical debt is the number one source of debt collections, outpacing credit cards, utilities, and auto loans.
Key Takeaways
- What happens if you don’t pay medical bills? If left unpaid, medical bills can be sent to collections, harm your credit score, and potentially lead to legal action. While forgiven debt may not always be taxed, the impact on your financial health can be long-lasting.
- Do unpaid medical bills go away over time? Medical debt can stay on your credit report for up to seven years, even if you ignore it. Federal efforts are underway to reduce how much this debt affects your credit.
- What are some ways to deal with unpaid medical bills? Check for billing errors, request a payment plan, or apply for financial aid. The No Surprises Act can also protect you from unexpected out-of-network charges.
What Happens if You Don’t Pay Your Medical Bills?
The longer medical debt goes unpaid, the more severe the repercussions get. Unpaid medical bill consequences include a lower credit score, garnished wages, and liens on property.
Debt Collectors Start Contacting You
After hospitals or doctors offices have exhausted all options trying to collect unpaid money on their own, it’s common for them to sell the unpaid medical bills to a collections agency. When this happens – typically after 90 days of unpaid bills – you’ll start to receive repeated phone calls or mail from a debt collector. These professionals are extremely persistent and will pressure you to find alternative payment solutions in order to repay your medical debt, and may even negotiate a repayment plan. Debt collectors rarely give up and are hard to ignore, so they often become an added burden for those facing medical debt.
Your Interest Rate Increases
Interest rate charges can quickly build up over time if you have an unpaid medical bill, steadily increasing the amount you owe. The exact details of the interest rate charges can often be found in contracts signed before the medical service is done.
You Accrue Additional Late Fees
Similar to the way debt collectors pressure you into making payments, healthcare providers will often pressure you into making payments by adding on late fees to your balance. Healthcare providers should disclose information about late fees on contracts, so it’s important to review details on your contracts before signing for the medical service. Patient advocates can help you communicate with your healthcare provider to ensure you receive the proper information needed to make decisions about your healthcare.
Your Credit Score Goes Down
Until recently, if medical debt wasn’t paid in a timely manner, collection agencies would report your unpaid debt to the major credit bureaus: Experiean, TransUnion, and Equifax. Each had a waiting period of 180 days before the medical debt appeared on your credit report, but after that ended, the unpaid debt became a part of your credit history and significantly dropped your score. After this happened, you would most likely find it difficult to get a new credit card or line of credit, and you wouldn’t qualify for lower interest rates. What’s more, these problems would continue for seven years, or the length of time the issue stayed on your credit report.
Starting in 2023, a new policy is taking effect, in which about two-thirds of medical collection would no longer be reported on consumer credit reports. Medical bills under $500 are currently more likely to remain on a credit report for longer than medical bills over $500. However, with this policy change, the $500 threshold could mean a large reduction in coercive credit reporting for those with relatively small outstanding medical bills.
You Can Be Sued
In a worst case scenario, collection agencies will file a lawsuit against you if your medical bill remains unpaid. Along with the immense stress, lawsuits are expensive and an additional burden on top of unpaid medical debt. If you were to lose the case, creditors or debt collectors could take further action to levy your bank accounts or garnish wages as payment. However, there’s often a statute of limitations that prevents suing for medical bills.
Lenders Can Place a Lien on Your Personal Property
Creditors, lenders, and even hospitals can take very aggressive tactics against you if your debt has not been settled, such as a lien on your property. A lien is a claim or legal right against assets typically used as collateral to satisfy a debt. Most of the time, creditors will pursue liens against your home, but may also pursue your car or any other physical asset you own. By placing a lien on your property, the creditor reserves the right to be repaid from the proceeds when the home is sold, and it also makes it difficult if you were to refinance your home.
Proceeds Could Be Taken from Your Estate at the Time of Your Death
If there is still unpaid medical debt at the time of your death, creditors can go after your estate during the probate process. This includes money from bank accounts, investment accounts, real estate, and other physical possessions. Life insurance earnings, 401k earnings, and certain trusts are protected and cannot be used to pay off medical debt, but other assets are potentially at risk. Essentially, this limits the amount your spouse, children, and other beneficiaries of your estate may receive when you die.
How Can You Decrease Your Medical Debt?
To many, medical debt is seen as a personal failure. It’s natural for those facing medical debt to hide and hope the bills and emotional stress go away, but this only prolongs the unpaid medical bill consequences. When these bills pile up, it’s better to be proactive than ignore the situation, because no matter your financial circumstances, there are a variety of ways to reduce the amount you owe to minimize the effect medical bills have on your finances.
Check for Errors in an Itemized Bill
After receiving a medical bill, it’s important to open it right away and review it for any errors. Unfortunately, medical billing errors are quite common. The sooner you review your bill, and follow up with your medical provider, the sooner you can find a solution to your billing issues, and before the debt affects your credit score, since errors take time to resolve. If your healthcare provider doesn’t give you an itemized bill, don’t hesitate to ask for one. Errors to look out for include:
- Duplicate items
- Services you didn’t receive or don’t recognize
- Charges that your insurance should have covered
Negotiate Your Medical Bill
Once you have agreed on what you should be charged for, you can try to negotiate your bill with your healthcare provider to lower the balance. Hospitals and healthcare providers may be able to lower the cost of medical bills for low income patients by providing some form of financial assistance. Explain your situation and ask if any charges can be waived or reduced. Additionally, discounts may be available if a large down payment is made upfront.
Ask the Hospital for a Repayment Plan
You can also ask the hospital or healthcare provider to agree to an affordable payment plan. This allows you to pay your bill slowly over time rather than a lump sum upfront, which could be easier depending on your financial situation. This is also a highly attractive option for the medical office, as they will receive payment over time rather than not at all. You should confirm if late fees and interest rates will be added to your repayment plan to ensure this option isn’t too much of an additional cost to you before you select it.
Hire a Medical Advocate
Medical advocates, like lawyers and healthcare workers, can often help with negotiating bills and finding errors. They will work on your behalf to determine whether or not your health insurance company has paid as much as they should have, and if not, why not. Although they do come at a cost, they can be well worth the investment in the long run.
Does Your Unpaid Medical Debt Go Away?
Unpaid medical debt doesn’t just vanish over time—it can follow you for years if left unresolved. While hospitals and providers may not report missed payments directly to credit bureaus, once the debt is sold to a collection agency, it can appear on your credit report and remain there for up to seven years, severely affecting your credit score.
Letting medical bills pile up can lead to significant long-term consequences. What happens if you don’t pay medical bills can negatively affect your credit score and even accumulate mounting interest and fees over time, making the debt even harder to manage and pay off. Over time, ignoring the issue can result in a much larger financial burden than when the bill was first due. Ignoring unpaid bills doesn’t make them go away—it often leads to increased costs and further financial strain.
Options to Help Pay Medical Bills
No matter how impossible it may seem now, there are actions you can take to pay your medical bill if you are unable to lower its cost or the payments are beyond your financial means.
Earn Cash With a Life Settlement
A life settlement is the sale of your life insurance policy to a third-party buyer for a one-time cash payment. Selling your life insurance can be a good solution for paying off medical debt, since it doesn’t require you to take on any additional debt. Although you forfeit your life insurance, it’s better than sacrificing other investment balances or refinancing your mortgage and other loans. Find out if you qualify to sell your policy by contacting Coventry Direct.
File for Bankruptcy
Filing for bankruptcy is often used as a last-resort means when dealing with unpaid medical debt, since this has a long-term effect on credit scores. In a Chapter 7 bankruptcy filing, healthcare bills are wiped out along with any other general debts. However, certain requirements need to be met in order to qualify for this type of bankruptcy filing, and the courts have the right to sell off some of your property to settle the unpaid medical debt. In a Chapter 13 bankruptcy filing, all healthcare-related debt is combined with other unsecured debts to be paid off over time.
Any type of bankruptcy filing will affect your credit score and stay on your credit report for up to 10 years, so be sure to speak with an attorney before moving forward to decide if bankruptcy is right for you.
Consider Taking Out a Loan
Low-interest loans can be taken out against your home equity or 401k plans to settle your unpaid medical bills. Keep in mind that these loans have long-term financial consequences, so it’s best to consult with an attorney before proceeding with this option.
Don’t Put the Debt on a Credit Card
No matter how much room you may have on your credit card, it’s best practice to not put any medical debt on a new or existing one. By charging medical bills, you risk wasting money on future interest charges and late fees, only further damaging your credit score. Credit card interest rates are extremely onerous, so they should only be considered if you have a clear credit history and realistic path towards repaying the debt after it’s charged to the card.
Unpaid medical debt results in consequences that affect every corner of your life. Control what you can by ensuring your medical bills are accurate, negotiate lower charges or a payment plan, and consult with medical advocates to speak on your behalf when it feels like you can’t manage the tasks on your own. If all else fails, consider selling your life insurance policy to get extra cash to pay off your medical debt. Contact Coventry Direct at (800) 268-3687 to learn about the process and qualifications.
Tips for Paying a High Medical Bill
If you’ve ever opened a hospital bill and felt your stomach drop, you’re not alone. Medical expenses in the U.S. can be unpredictable and overwhelming—and what happens if you don’t pay hospital bills can add to that stress—but there are ways to take control. From verifying charges to setting up payment plans, here are practical tips to help you tackle a high medical bill.
Verify Debt Legitimacy
Start by confirming whether you actually owe the bill. Thanks to the No Surprises Act, which took effect in 2022, many patients are protected from unexpected out-of-network charges.
- Out-of-network emergency services can no longer result in surprise bills.
- You may be protected from “balance billing (when you’re charged the difference between what the provider charges and what your insurance pays) in certain situations.
- You can learn more about your rights under the No Surprises Act via CMS.gov.
Check the Accuracy of Charges
Billing errors are more common than you might think. Review every line item on your bill:
- Double-check dates of service, listed procedures, and medication charges.
- Use hospital price transparency tools to see what others are charged for similar procedures.
- Contact your insurance company to ensure they’ve processed their part correctly and applied your coverage appropriately.
Negotiate Discounts
Hospitals often have room to negotiate, especially if you’re paying out of pocket.
- Ask for a prompt payment discount or the Medicare rate, which is often lower than what’s initially billed.
- Many billing departments are willing to work with patients who proactively reach out.
Explore Debt Forgiveness or Settlement
If your financial situation is dire, you may be able to pursue:
- Debt forgiveness, where the provider cancels the bill entirely.
- Debt settlement, where you offer to pay a portion of the total in exchange for closing the account.
Both options may impact your taxes or credit, so speak with a financial advisor if you’re unsure.
Inquire About Financial Assistance Programs
Hospitals receiving federal funding are required to offer financial assistance policies, but you have to ask.
- These programs often require a Medicaid denial letter and proof of income.
- You may qualify for partial or full forgiveness based on your financial documentation.
Check the IRS guidance on hospital financial assistance for more details.
Utilize Indigent and Charity Care Programs
Nonprofit hospitals—and some for-profits—offer charity care to patients who meet income criteria.
- These programs may offer free or reduced-cost care even after treatment has been received.
- Requirements vary by hospital, so ask your provider or billing office for application information.
Set Up a Payment Plan
If you can’t pay the full bill upfront, ask to set up a direct payment plan.
- Hospitals may offer interest-free plans for qualified patients.
- This option is often better than medical credit cards or third-party financing, which can include steep interest rates.
Veteran-Specific Assistance
If you’re a veteran, you may have access to additional resources:
- The VA offers medical debt counseling, repayment plans, and hardship relief.
- Recent federal efforts have also limited how unpaid VA medical bills affect your credit report. Learn more via the Consumer Financial Protection Bureau.
Consider Debt Consolidation
Debt consolidation can make repayment more manageable by combining multiple bills into one.
- You might use a personal loan, 401(k) loan, or line of credit.
- However, be cautious—this creates a new debt obligation and can still affect your credit score if not managed well.
Bankruptcy as a Last Resort
If all else fails and the debt becomes unmanageable, bankruptcy may be an option.
- Chapter 7 can discharge medical debt through liquidation.
- Chapter 13 allows for structured repayment over time.
- While bankruptcy can severely impact your credit, it can also provide a fresh start when no other options are viable.
