Reader Question: Medical Collections Never Sent Bill

Lee,
I received a call recently about a $200.00 medical bill from 2009. It was for lab work that my primary care physician had mailed to an outside lab. The CA claimed they just found a number for me which is doubtful seeing that I am the only person with my name in the US and, like everyone else, I have Googled myself in the past and there is plenty of info including my phone number available and has been for years. I also use the same search services like Accurint at my place of employment and I know my info is out there. I requested the original bill by mail and received it which showed it had a very old address of mine listed, hence my never having received it.

I have and have always had a perfect credit score and have never paid a bill late. I'm mad as hell that someone ele's mistake may sully my credit history. I certainly have the means to pay the bill but want to wait to see what if anything can be done to salvage my credit score. Thanks, I have learned much from reading your site although I would have rather not to have ever had to find your site.

---Anonymous

Dear Anonymous,

Most of the frustration I get from clients in regards to collection agencies is related to the collection agency hunting them down and pursuing them endlessly. It's good to remember that collection agencies can be just as frustrating when they don't put forth much effort at all. 

Your first step should be to get copies of all three of your credit reports and see whether the collection agency has already added its trade line to your reports. You can get one free credit report per credit bureau  per year. The ONLY website authorized by the federal government to provide consumers with their free annual credit reports is AnnualCreditReport.com. If you order them anywhere else (including from the credit bureaus) you'll have to give out your credit card number and sign up for some ridiculous program or other. 

If the collection agency's trade line doesn't appear on any of your reports, the solution is as simple as agreeing to pay the bill provided the collection agency agrees not to report it. Problem solved. This is much easier than trying to negotiate a pay-for-delete. You would, of course, need to get this agreement in writing before sending the bill collector a dime. Otherwise, you can pretty much guess what will happen. You'll be out $200 and the collection agency will report your debt as "paid" to the credit bureaus. Paid collections hurt your score just as much as unpaid ones. 

If the collection agency's trade line is already on your credit reports, its time to call the doctor's office. Your primary care physician knows your address and telephone number but not only did the office not bill you, they also (apparently) didn't provide the collection agency with your contact information. Sounds fishy, doesn't it? I'd call the office, ask to be transferred to the person who handles billing and explain very politely what happened. 

Ask why you weren't billed and make it clear that you'd be more than happy to pay this debt, but that because of negligence on the part of either the doctor's office or the collection agency or both, you're now stuck with an undeserved collection on your credit report for seven years. The billing person will likely tell you there is nothing they can do and that you'll have to take it up with the CA. Be prepared for this and inform this individual that only the original creditor can recall the account and there was a clear error here and you need your account recalled. 

If the billing person doesn't help you, talk to the office manager. Talk to the nurse. Talk to anyone you can who will listen. If no one will help, write the doctor a letter. Explain what happened and how distraught you are. Tell him that you've always paid on time and now your credit is damaged due to circumstances completely beyond your control and ask for help. You'd be surprised how well people respond when you use the word "help." Seriously. 

A few years ago my daughter ended up in the hospital while on an out-of-state camping trip. She was transferred to two different hospitals, saw numerous specialists and had two different surgeries in different cities as she was being transported home. As you can probably guess, I got roughly a billion different bills for different services. And then the inevitable happened: I got a threatening collection letter even though I paid every bill in full as soon as it arrived. 

I did everything I've told you to do. In the end, the problem was fixed and the doctor actually called me at home to apologize. He explained that his office uses a third-party billing agency. This billing agency frequently  sent threatening letters for debts that weren't even late. He told me that this has happened with the past few billing agencies he contracted with and that the problem was widespread. He had every intention of trying out yet another agency, but my point here is this: if the collection agency is sloppy and unethical, the doctor probably knows about it and will be willing to help you out. 

Other specialists in this field may disagree with me on this, but I see no need to dispute this debt with the credit bureaus when what you're dealing with is a genuine mistake that can and should be rectified by the creditor. Disputes should be a last resort because, once the collection agency verifies the debt's validity  the credit bureaus can ignore any other disputes on that particular account. So tread carefully and work this out with the doctor's office directly – not the collector. 

Best of luck,

Lee 

Reader Question: Which is Worse for Credit Score, Settlement or Bankruptcy?

Hello Lee!

I, like all of the people on here, am stuck in a bad situation and I don't know what to do. I went thru a nasty divorce that lasted 3.5 years and in that time I was a single mom trying to survive. All money I made went to lawyers, a roof over our heads and food. I had to take loans out and credit cards to just buy groceries. I'm slowly (I mean SLOWLY!) getting back on my feet. I'm looking at $27,00.00 in debt. I thought about filing bankrupt papers but wanted to look into setteling my debts with the CA. Which would kill my credit more you think? It literally has been years since I paid anything. I think last year I paid $50.00 to each company (4 of them) to get them to stop harrassing me on the phone. You seem to give amazing advice! Please Help!!!

Monica

Monica,

Unfortunately, $27,000 is a large enough amount that a collection agency wouldn't hesitate to sue. I'm hoping this $27,000 is your total debt and not your debt to a single creditor. That might make this situation easier to manage. 

You made a mistake by paying them anything. Each time you send them money, that resets the statute of limitations for a lawsuit. You don't mention which state you're in, but the SOL ranges from 4-6 years in most states. 

Your position to settle depends on your ability to pay. For example, if you have a job, money in the bank or own property, such as a home or car, the collection agency can sue you and force you to pay the full amount by garnishing your wages, emptying your bank accounts and seizing and selling your property. When you contact a CA you haven't heard from or spoken with in a long time and propose a settlement, all you're basically saying is "I have money now! Come and get me!" So, of course, the CA begins to rabidly pursue you (usually for the full balance). 

The older an account gets, the less likely it is that the CA will get paid and the more likely a CA is to accept a settlement. They'll generally send you a settlement proposal in the mail. Once you know the company is ready to settle, you can then call the company and negotiate back and forth. Negotiate up, not down. For example, name a lower number than you can afford to pay and let the collector bring your price up. Don't start from the collector's settlement offer and start negotiating down. This is a cheap psychological trick, but it often works. It makes the collector feel that he's "won" by getting you to pay significantly more than you offered while simultaneously helping you get a lower settlement than you would have gotten by negotiating down from their offer. 

Settling with the original creditor on a debt will decimate your credit, that much is true. Settling with a collection agency, however, won't. You see, the collection account on your report is as bad as it can get. It can't get any worse. So whether its paid, unpaid or settled, its still a collection account and it still affects your credit rating exactly the same. In general, however, bankruptcy is always worse for your credit report than settling with anyone. And if you file Chapter 13, you have to pay those debts back anyway – sometimes in their entirety.

Now, since you mentioned bankruptcy, here's where things get interesting. If you end up filing for bankruptcy, the collection agencies get NOTHING and they can't sell the debt either. If and when you call for a settlement, tell the collector you speak with that you are filing for bankruptcy if you can't get these debts taken care of. The word "bankruptcy" will usually make creditors much easier to work with. After all, you've got them over a barrel. They either work with you and give you a reasonable repayment option or they get nothing. 

If bankruptcy is really an option, I wouldn't make a single payment to any of these creditors until you've got settlement agreements IN WRITING from each of them. The last thing you need is to settle with several of them only to have the last sue you and force you into bankruptcy. If you end up filing bankruptcy anyway, paying the first few settlements was nothing more than a big waste of money. It's all or nothing here. 

Oh, and if you're outside of the SOL in your state for any of these debts, feel free to twiddle your fingers until they go away. They can't sue you. You can send a written request that they stop telephoning you and they have to adhere to it. It's just as effective as sending a payment and, if the SOL has expired, a whole heck of a lot safer. If the SOL hasn't expired, let them call. Prohibiting contact with an SOL that's still in effect is just begging for a lawsuit. 

If you have any other questions, feel free to ask. 

Best of luck to you, 

Lee 

Can a Collection Agency Sue After the Statute of Limitations Expires?

You can end up in court after the SOL passes.

A debt collection lawsuit is of the most frightening outcomes for debtors struggling with collection agencies. You are responsible for the debt until you pay it, but each state places a limit on the amount of time a collector has to sue you via the debt collection statute of limitations  Unfortunately, the statute of limitations does not provide you with absolute protection, and you could still face a collection agency lawsuit after the statute of limitations passes.

Lawsuits After the Statute of Limitations

When a collection agency sues you, it must send you a summons. The summons notifies you that you're being sued, contains the date, time and location of the hearing and gives you an opportunity to respond and claim a defense. The vast majority of people who are sued by collectors do not respond to their summons. In most cases, this is simply a matter of fear. They either know that the debt is theirs and believe that because the debt is legitimate they cannot fight it or don't know what to do – so they do nothing.

When you don't respond to a summons and claim a defense, the collection agency wins its case by default. Because no one is there to contest their claims, they don't have to prove a thing to the court and the judge awards the collection agency a default judgment.

Don't assume just because the statute of limitations has passed that a collection agency will not sue you. Because so few debtors bother to defend themselves, the collection agency's game of legal roulette has excellent odds. You see, the statute of limitations is an affirmative defense. That means that you can have the case dismissed but only if you bring up your defense in court. If you don't appear in court and defend yourself, the judge has no way of knowing that the statute of limitations on the debt has expired – and the debt collector certainly isn't going to volunteer the information.

Surprise! You Owe a Default Judgment!

The judge doesn't know the SOL expired unless you appear

A collection agency cannot file a lawsuit against you without sending out a summons. You must be notified of the lawsuit. If you aren't aware that a collection lawsuit is underway, you aren't able to defend yourself. If the statute of limitations has already expired on your debt, the collection agency knows that you have an affirmative defense. Thus, its in the collector's best interests to ensure that you never receive a summons.

Collection agencies get away with this in different ways. Some don't mail out a summons at all while some intentionally send the summons to an old or incorrect address (the collection agency can view your old addresses on your credit report). Unless you live in a state that requires you to be served with a summons in person, don't be too surprised to check your credit report one day and find a collection judgment.

Filing an Appeal to Remove Judgment

Although state laws regarding judgment appeals differ, you usually have a set amount of time to appeal a judgment. One of the grounds under which you can appeal is improper service. Because you weren't able to defend yourself in the original hearing, the court may schedule a new hearing and make a new ruling.

You don't have the ability to appeal a collection judgment indefinitely. Most states have a time limit for appeals. Let's say, for the sake of argument, the window of opportunity for filing an appeal is six months. If you aren't aware of the judgment, the collection agency may wait seven months before it garnishes your wages or freezes your bank accounts. Once this occurs, you know without a doubt that the collector has a judgment against you. Had the garnishment occurred earlier, you could have appealed, but the collector has waited just long enough to ensure that you no longer have the right to appeal before enforcing its judgment.

Protecting Yourself After the Statute of Limitations Runs

Got a surprise judgment? Kiss your money goodbye

Your goal in protecting yourself after the statute of limitations runs is to make sure the collection agency can't do anything sneaky to nail you with a garnishment, bank levy or property liens. Subscribing to a credit monitoring service is one way to do just that. I am a big, big fan of credit monitoring services. When anything changes on your credit report or something new gets added, the credit monitoring service will automatically notify you. This prevents the collector from keeping a default judgment a secret until you can no longer contest it. Although the credit bureaus each offer credit monitoring, a third party company that provides you with a tri-bureau report gives you more bang for your buck.

And whatever you do, never ever ignore a summons just because the statute of limitations on the debt has expired. You'll regret it dearly when the collector uses a default judgment to drain you financially and destroy your credit.

Related Articles:

How to Respond to a Bill Collector's Lawsuit

Can You Reset the Statute of Limitations on a Debt?

Collection Lawsuit Statutes of Limitations By State