What Happens If You Ignore a Medical Debt?

The following is presented for informational purposes only and is not intended as credit repair advice.

Given the complicated nature of the American healthcare system, the cost of getting any kind of medical attention can range from free to a simple $30 copay to a massive life-altering multi-thousand dollar bill, and everywhere in-between.

We've talked before about using charity care to help defray some of those massive bills, but a medical bill doesn't need to be massive to be unaffordable. A $200 bill is enough to send most of us spiraling (financially speaking).

When money is tight and tough decisions need to be made, it's not unreasonable to think, "I just can't pay this medical bill." But what happens when you ignore a medical debt? 

Impact on your credit score

Hospitals and medical service providers don't typically report to credit bureaus, so simply having an outstanding medical debt has no baring on your credit or your credit score. Medical debt only impacts your credit score once it moves to collections, and even then any potential impact on your credit will be delayed. Here's the general timeline of events:

• Grace period - You've usually got 90 to 120 days from the date of the bill before the hospital or practice will send your unpaid account to collections. 
• Reporting freeze - Once the debt is sent to collections it cannot be reported to credit bureaus for one year, giving you time to figure out a path to repayment before your credit is impacted.
• Immediate removal of paid debts - Once a medical debt has been paid off, even if it was sent to collections, it must be removed from your credit report, meaning that it no longer has any negative impact on your credit score.

Leaving aside these caveats, many credit scoring models outright ignore medical debts, even the ones in collections. So, depending on the scoring model, an unpaid medical debt may have no impact whatsoever, no matter how big it is or how long it's been waiting to be paid.

Small balances are ignored

One recent and important change is the exclusion of any medical debt below $500 from your credit report. If you owe as much as $499 and it gets sent to collections and you never, ever pay, it still won't have any impact on your credit score.

Note that $500 is the upper limit for any one specific medical debt, not a total debt threshold. You can have multiple debts adding up to over $500, but as long as the individual debts are each below $500 they won't show up on your credit report.

You can be sued for unpaid medical debt

Even if your credit isn't impacted by ignoring a medical debt that doesn't mean you're out of the woods. Creditors can still sue you for the money you owe.

What happens if you get sued?

If you get sued for an unpaid medical debt (and it's legitimate), the most likely outcomes are:

• Wage garnishment
• A levy on your bank account
• A lien (or liens) on your property

You can also try to work out a settlement or a payment plan to avoid those much harsher outcomes.

Ultimately, it's always in your best interest to repay a medical debt when that's possible. If nothing else, it gives you peace of mind and fewer angry voicemails.

But there will always be times when money is tight and you simply can't pay everything that needs to be paid. In those circumstances, consider connecting with a certified financial counselor at MMI. As a nonprofit, our focus is to help consumers make the best choices for their situation. We can help you review your finances, direct you toward helpful resources, and make personalized recommendations.

And if debt payments are making every financial decision extra dramatic, we offer a variety of low-cost debt relief options to help you get back on track.