Two things to try before paying off medical debt
Don’t pay without checking these first.
Hey —
Claire here. If a debt collector is bugging you, and — having done the due diligence we recommend — you think they’re on the level, we want you to check two more things.
One is for if your debt is relatively recent, like within the last year, and the other could help if your debt is really ancient, like from years ago.
If either is the case, you may not need to pay. Let’s get into it.
Charity care could reduce or cancel your debt
We’ve talked about charity care a lot on the show and before in this newsletter. To recap, charity care is financial assistance hospitals offer to patients with incomes below a certain level.
Nonprofit hospitals (which make up the majority of US hospitals) are required to have them. A lot of for-profit hospitals have similarly generous charity care policies too.1
A lot of us qualify — and even if your bill is overdue, it may not be too late.
You have at least 240 days (about eight months) from the initial billing date to apply.
You can check if you’re eligible for financial assistance at your hospital using this tool from our pals at Dollar For, an organization dedicated to helping people access charity care.
Once you apply, you can let the bill collector know that your charity care application with the hospital is pending.
Plus, Dollar For’s founder Jared Walker says hospitals will sometimes forgive bills much older than 240 days, so it’s worth applying even if you’re past that eight-month deadline.
If you’re in a really different situation where your debt is way past 240 days old — and I mean years and years old — here’s something else to look into:
The statute of limitations, and how it can save you from old debt
After a certain period of time, debt collectors can’t sue you over medical debt anymore.
State laws prevent debt collectors from being able to sue you over really old debt. In other words, there is a “statute of limitations” — SOL for short2 — on debt collection lawsuits.
Once you default on a debt — like, you’ve missed the original deadline your doctor’s office or hospital set for you to pay your bill — the clock on the statute of limitations starts ticking.
In most cases, a debt in the hands of a collector is already in default: That clock has already been running. From there, the debt collector only has so long to lodge a suit against you — two years, four years, six years — whatever the SOL is in your state.3
At that point, Jenifer Bosco from the National Consumer Law Center (NCLC) says, “You still technically owe the debt, but there’s not much the debt collector can do to collect it.” Meaning, they probably won’t sue you.
And if they did still try and sue you — and it’s been known to happen — you could raise the SOL as a powerful defense in court. (You do have to show up in court. Don’t lose by default!)
To see if the SOL protection applies to you, check the statute of limitations for debt in your state. To find more information, search “your state’s name + statute of limitations on medical debt” in Google.
The site “Debt Collection Answers,” run by consumer finance expert and friend-of-the-show Gerri Detweiler, suggests reaching out to your state attorney general’s office for the most up-to-date information.
Important caveat from the NCLC’s Jenifer Bosco here — if you make a partial payment on the debt, it might start the clock over again.4
So if it’s past the SOL, don’t pay a dime.
And if it’s getting close, or if you don’t expect to pay off your debt before that SOL passes, it’s your judgement call, but it could be worth letting the clock run out.
Then, consider sending that debt collector a “cease contact” letter so they don’t trick you into taking action on that debt.
The NCLC has a PDF or Word template you can use. You might want to add a line noting that you believe the statute of limitations on this debt has expired.
Under the Fair Debt Collection Practices Act, once they get this notice from you, a collector is only legally allowed to contact you to acknowledge they received your note or to notify you about legal next steps.
Of course, these steps may not solve your problem. You may still have a debt to deal with. So, in an upcoming newsletter, we’ll talk through some strategies for how to bargain with bill collectors, which could mean paying less.
That’s all from me for now.
— Claire
P.S. from Dan
Last week, we asked your advice on building a one-stop shopping tool boiling down essential advice — and links! — for anyone getting treated at a hospital (and worrying about bills).
And lots of you chimed in. Thank you SO MUCH! We're still reading — and you can definitely still send us tips. It may take a while to make this idea a reality, but you're definitely encouraging us to keep going.
Plus, if you’re being seen at a doctor’s office owned by a hospital system, that hospital’s financial assistance policy could apply.
Which is fun, because it means your friendly neighborhood debt collector is S.O.L., as in S– Out of Luck!
While the SOL protects you from lawsuits, it doesn’t impact how long a debt can appear on your credit report. That’s regulated by the Fair Credit Reporting Act. Under this law, debt disappears from credit reports after approximately seven years.
According to the site “Debt Collection Answers” even simply agreeing to make a payment on a debt or acknowledging you owe it can start the clock over in some states. So if a debt collector contacts you about an old debt, avoid discussing it until you can do more research.