The stress of medical debt ^
Summary: Are you stressed out about an old medical debt? You might not need to worry any longer. Learn your state's statute of limitations on medical debt.
If you are being sued by a debt collector regarding unpaid medical bills, it is important to determine the age of the outstanding medical debt. Why? Because you may be able to use the statute of limitations as a defense to get the debt collection lawsuit thrown out of court.
What Is a Statute of Limitations?
The term “statute of limitations” refers to the finite amount of time an individual has to file a legal action against another person, company, etc. When it comes to medical debt, the statute of limitations typically becomes an issue when a debt collector is attempting to recover on a bill that has been deemed “unpaid” for years.
It is important to understand that the courts do not track the statute of limitations. Instead, the responsibility falls on the defendant (i.e. you) to raise the statute of limitations as a defense and affirmatively request that the collection lawsuit be dismissed due to the statute of limitations. responsibility to prove the debt has passed its statute of limitations.
The statute of limitations can be an effective tool in getting a debt collection lawsuit dismissed, if applicable. However, it is important to understand that even if the medical debt is beyond the statute of limitation, it does not mean the debt is wiped away from your records. It simply means the debt cannot be recovered through a lawsuit. The medical debt can still stay, and negatively impact, your credit report for 7 years.
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Statute of Limitations by the Type of Debt
It is necessary to determine not only the age of the debt but the specific type of debt that is attempting to be collected upon. This is because the applicable time limits vary depending on the type of debt. Here is an overview of the general categories of debt:
- Contractual Debt - Virtually all financial obligations that require the signing of a contract are considered to be contractual debts. Many forms of medical debt are categorized as contractual debt.
- Debt Based Upon a Promissory Note - A promissory note is generally considered to be a written agreement where you expressly agree to repay a specific amount of money via a set number of payments, at a specific interest rate, and within a specific period of time. Some medical debt falls into the promissory note category, particularly when someone takes out a personal loan to help pay for a medical procedure or treatment.
- Debt From an Open-Ended Credit Account - Credit cards and lines of credit are considered to be “open-ended” accounts since the amount you owe, and the amount you have to pay back each month will fluctuate. Some people use credit cards to help pay for expensive medical procedures and treatments so it is possible for medical debt to accrue through this type of account.
- Debt Through an Oral Agreement - Some debts can be made based upon a verbal agreement between two or more individuals. This rarely applies in the context of medical debt
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Statutes of Limitations Varies Based on Where You Reside
It is important to understand that there is no general, one-size-fits-all statute of limitations. Each state legislature enacts its own set of statutes of limitations related to different types of legal actions, including the collection of unpaid debts. In most states, the statute of limitations to collect on unpaid medical bills is between three and six years. However, in some states, a creditor has between 10 and 15 years to try and collect on the debt.
Here is the definitive guide detailing the statute of limitations in each state for debt lawsuits.
Common Debt Collector Trick to Reset the Statute of Limitations
Many debt collectors, especially large debt collection agencies working on behalf of insurance companies and hospitals, are well versed in the statute of limitations. They routinely attempt to take advantage of consumers who may not have much knowledge about how the statute of limitations works and exploit it to their advantage. For example, if you make a payment on an old debt, it is important to understand that the new payment effectively resets the proverbial clock on the statute of limitations.
This is why it is fairly common for a debt collector attempting to recover on old medical debt to try and pressure you into making a fairly small, nominal payment towards the amount owed. The only reason they are asking for a small amount is to ensure the clock is reset for the statute of limitations.
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Unpaid Medical Debt Can Impact Your Credit
Medical debt, just like virtually all other debt, is listed on your credit report, including whether that debt is delinquent or current. As mentioned earlier in this article, the statute of limitations does not directly impact or influence the amount of time a debt can remain on your credit report and the impact it can have on your score.
When you have unpaid medical debt in collections, it will stay on your credit report for at least seven years. After seven years have passed, the debt may no longer be visible on your credit report, unless a debt collector pursues a judgment against you during that time period.
If you can repay a delinquent medical bill, that repayment should be updated on your credit report and taken out of the collections category. Depending on your particular situation, you may be able to have the medical debt deleted entirely from your credit report. This is common when someone is wrongly sued for a medical debt they do not owe.
If you're negotiating with a debt collector, confirm that steps will be taken to update the status of the account on your credit report before you agree to make a payment.
If you are being harassed by a debt collector or were served with a Summons and Complaint, related to unpaid medical bills, it is important to determine the age of the debt so you can assess whether a statute of limitations defense is viable. The relevant statute of limitations for your particular matter will depend primarily on the type of medical debt you purportedly have and the state in which you reside.
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