Sarah Edwards | June 12, 2023
Edited by Hannah Locklear
Summary: Collection agencies purchase medical debts for a fraction of their original value, sometimes as little as 4% of the original medical debt amount. Learn about the debt buying process and get help with medical debt in collections from SoloSuit’s simple guide.
Getting a collection notice means that your creditor decided to sell your debt to a professional collection agency, and you’ll probably hear from it frequently in the coming months. Debt collectors take the collections process seriously — after all, their entire business model is collecting old debts and pursuing consumers for payment.
While you can’t stop a creditor from charging off your unpaid medical debt and selling it to a collection agency, it helps to know how the process works. In some cases, you may be able to use it to your advantage.
Settle your medical debt fast with the help of SoloSettle.
Costs for medical care in the U.S. are notoriously high. Purchasing a health plan through the Affordable Care Act’s online marketplace can set you back an average of $560 monthly, and an in-patient hospital visit can run into thousands of dollars.
People without health insurance are at high risk of incurring large medical bills, especially if they experience a catastrophe that requires surgery or extended time in a medical facility. But health insurance doesn’t cover all your medical costs. Most plans have deductibles and require co-pays for certain services. A $50,000 hospital visit can cost you $5,000 or more, even if you have a decent plan.
Hospitals aren’t allowed to turn away patients who need emergency care, even if they don’t have health insurance. Uninsured patients who need their services will receive a bill afterward and may be unable to pay it.
If you don’t pay an outstanding medical bill, your creditor will try to set up a payment arrangement with you. If time passes and you don’t attempt to repay the debt, it may charge off the obligation and sell it to a collection agency.
Typically, collection agencies purchase outstanding debts from providers and hospitals in their area. Some larger medical providers partner with specific collection agencies and regularly sell them debts.
Collection agencies buy outstanding medical debts at a fraction of their original value, especially if the chance of collecting the entire amount is remote. Debt buyers may pay as little as $0.04 to $0.14 for every dollar of a consumer’s outstanding debt. These costs vary depending on the age of the debt and the likelihood of collecting some of the money due. In other words, collection agencies may pay as little as 4% of the original medical debt amount and then try to collect on the full amount, making a huge profit if they do.
Once a collection agency gets hold of your outstanding medical debt, it will initiate communication with you via a written letter. The first letter from the collection agency should note the amount you owe and your original creditor. It will also give you 30 days to dispute the debt.
You should immediately ask the collection agency to validate your debt. A debt validation confirms that the collection agency is the proper new debt owner. You can also ask it to provide an age for the debt, which tells you how long you have until the statute of limitations runs out.
If you’re unsure how to draft a Debt Validation Letter, use SoloSuit’s Debt Validation Letter template.
If you don’t make arrangements to repay your medical debt, the collection agency may take legal action against you. A medical debt lawsuit can make a bad situation worse, especially if the collection agency wins a judgment. The judgment will allow the agency to garnish your wages or seize money from your bank account.
Let’s consider an example.
Example: Ned is out surfing one day when a shark suddenly attacks him. Fortunately, his injuries aren’t too severe, but he needs stitches for a bite to his torso. Ned goes to the local hospital, which treats him for the shark bite. He doesn’t have health insurance and receives a $4,000 bill from the hospital a few weeks later. Ned doesn’t have the money to pay the hospital bill, so he ignores it. Six months later, a collection agency purchases Ned’s account and contacts him. Ned sets up a monthly payment plan to pay off his medical bill over several years, which lets him avoid legal action from the collection agency.
When a collection agency purchases a medical debt you owe, you’ll likely hear from it often.
Make sure that the agency is the proper debt owner before you agree to make any payments. You may be able to set up payment arrangements or settle the debt for less than you owe. While having a medical debt in collections can be frustrating, addressing the situation head-on is better than allowing it to fester.
Do you need help settling a medical debt? Check out the following video to learn the steps to debt settlement.
SoloSuit makes it easy to fight debt collectors.
You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.
SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.
Here's a list of guides for other states.
Being sued by a different debt collector? Were making guides on how to beat each one.
You can ask your questions on the SoloSuit forum and the community will help you out. Whether you need help now are are just look for support, we're here for you.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.
Out Debt Validation Letter is the best way to respond to a collection letter. Many debt collectors will simply give up after receiving it.
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