Is There a Statute of Limitations on Medical Debt?
The following is presented for informational purposes only and is not intended as legal advice.
If you’ve ever been uninsured, under-insured, or had a high co-pay that you couldn’t afford, you may be faced with some medical debt. But what happens if you just don’t pay it? Does it ever go away?
These are all good questions. The short answer is that medical debt may disappear from your credit report after seven years, but that doesn’t mean you’re off the hook. Medical debt never expires. It does have a statute of limitations, however, but it works differently than you might think.
What's a Statute of Limitations
A statute of limitations is the amount of time a creditor has to take legal action against you for non-payment. If you owe money to a hospital or other health care provider, the amount of time they have to sue you for this debt depends largely on the laws of the state where the contract was created.
Crucially, the statute of limitations varies for each state and for each type of debt.
Different Rules for Each Contract Type
The statute of limitations on your debt is defined largely by the type of contract governing the debt. Oral contracts have a different statute than written contracts, promissory notes, and open-ended contracts. What does that mean?
- Oral contracts are verbal agreements you make to repay money. An example of this would be a friend agreeing to lend you money, but not putting anything in writing.
- Written contracts are documents you sign that include terms and conditions. Most loans like car loans, personal loans, and mortgages fall into this category. So does medical debt – you will almost always be asked to sign paperwork agreeing to repay any expenses accrued (and not covered by insurance) prior to receiving medical care.
- Promissory notes are a lighter written contract, an agreement between two people with the repayment terms and interest spelled out.
- Open-ended contracts have a revolving balance that you can repay and borrow again, like credit cards.
Again, each state has their own statute of limitations for each kind of debt. You can find the limitations for your state here.
Credit Reporting vs. Statutes of Limitations
Debt never dies. It can be forgotten and its impact may lessen over time, but it’s important to remember that just because you don’t feel or see the debt, that doesn’t mean it’s gone.
After a certain period of time, usually seven years, most debts will fall off your credit report. But that doesn’t mean it goes away. The debt still exists – it simply isn’t being reported by the credit bureau anymore, and is therefore no longer visible to anyone looking at your credit report. It should also cease to impact your various credit scores at that point.
When the statute of limitations on your debt expires, that doesn’t mean the debt goes away, either. It just means that you are no longer legally responsible for the debt. There’s an important distinction to keep in mind here – you can still be sued for the debt. If the statute of limitations on that particular debt has expired, it would be your responsibility (or your attorney’s responsibility) to notify the court that this has happened.
Don't Lose Track of Your Debts
Statutes of limitations are a form of protection for consumers, but they aren’t automatic. It’s your responsibility to stay informed about your debts and your rights.
The best way to ensure that medical debt doesn’t hinder your credit or land you in legal trouble is to pay it off. No matter the circumstances, paid debts will almost always reflect better on your credit than unpaid ones. And, most importantly, proof that you’ve paid a debt in full is the best protection against any future collection attempts or legal actions.
If your medical debt is too high to repay at this time, be sure to ask about repayment plans and hardship programs. Medical service providers are often more flexible with debts than traditional lenders and creditors may be.
Read more: How to Negotiate Down Your Medical Bills
If your debt has moved to collections, you may be able to work out a settlement compromise that allows you to pay less than the full balance owed. In most cases, something is better than nothing. Just keep in mind that settlements may have tax implications and you’ll want to make sure you get everything in writing.
Finally, if you’re juggling a variety of debts and it’s preventing you from making financial progress, consider speaking with a nonprofit debt and budget counselor from MMI.
Counseling is free, confidential, and available online, over the phone, and even in-person in select locations. It’s a great way to understand your circumstances and come away with an effective plan to help you maximize your money and reach your unique financial goals.