How to stop medical bills from going to a collection agency

Having undergone multiple reconstructive foot surgeries, Brian Davis of Playa del Rey accumulated $400,000 in bills. "It was a constant juggling of finances for years," he said. He ultimately filed for bankruptcy.
(Jay L. Clendenin / Los Angeles Times)

Brian Davis is no stranger to surgery. Born with clubfeet, the 35-year-old Playa del Rey resident has endured multiple reconstructive foot surgeries over the years.

With an endless stream of medical procedures, doctor visits, hospital stays, rehabilitation and a lifelong physical disability that has made steady work a challenge, Davis — a former financial advisor — has also become very familiar with big medical bills. He spent years struggling with debt that, at its peak, reached roughly $400,000.

Every month, Davis says, “I had to make a decision about whether I was going to pay the insurance, the medical doctor or the attorney. It was a constant juggling of finances for years.” Health insurance has covered much of his care, but it wasn’t enough to keep him out of financial trouble.


Although an extreme case, Davis is not alone. According to the Centers for Disease Control and Prevention, more than 54 million Americans — nearly 20% of the population — had trouble paying medical bills in 2012.

Often, outsized bills lead to calls from collection agencies looking to recoup money on behalf of physicians and hospitals. In some cases, consumers are surprised by a collections notice, having never been informed of a bill.

Last year, 1 in 5 adults — an estimated 41 million people — were contacted by a collection agency about medical bills, according to the Commonwealth Fund, a New York think tank. Roughly 7 million people said their account was sent to collections because of a billing error.

“This can truly happen to anyone. It doesn’t matter how responsible you are; you may end up hearing from a collection agency for a variety of reasons,” says Gerri Detweiler, director of consumer education for, a website offering free credit scores and financial information.

Still, consumers can prevent their medical bills from being sent to collections, experts say. And they can help or hurt themselves if a bill gets to that point, depending on how they respond.

Don’t avoid bills


“The natural reaction when you can’t pay the bill is to go silent and avoid communication,” says Lloyd Douglas Dix, legal advocate for the California Assn. of Collectors, which represents collection professionals. But that often backfires, causing providers unable to reach you to send your account to collections, which can then damage your credit.

“As long as you pay something the doctor will usually hang onto the debt,” Dix says.

Confirm accuracy of charges

According to the American Medical Assn.’s National Health Insurer Report Card, commercial health insurers have an error rate of 7.1% — a dramatic improvement over its 2010 findings of 20%. Still, it’s important to confirm that medical charges are accurate and to quickly take action to correct mistakes.

Any disputes you have with your insurer that delay payment should be explained to your provider. “Ask that they not send your bill to collections until you’ve resolved the issue,” Detweiler advises.

If you never received a bill for medical services, that should be a concern too. If no explanation of benefits arrives for some time following your visit, call the provider to find out what’s going on. Finally, confirm that your provider has your correct mailing address, and that your insurer’s billing address is still current in the provider’s system.

Know your rights

If you receive a surprise notice that your account has gone into collections, your first step is to confirm that the charge is legitimate.

Both federal and California state law give consumers the right to request that collection agencies send verification in writing of a debt owed, and they must cease collection efforts until they’ve complied with your request.

In addition, California law requires debt collectors give you notice that your account has been assigned to collections and that you have 30 days to dispute it. Though not a requirement of the law, typically, Dix says, bill collectors will send this notice before reporting your account to credit agencies.

If you don’t owe the money or you’ve already paid the bill, send the collection agency an explanation in writing. Forward any receipts or copies of canceled checks you have to support your claim. Most explanations of benefits are online, Dix says. “You can print it and fax it to me in two minutes. If you’ve done this within 30 days, I won’t report it.”

Still, Detweiler, says, once a bill is sent to collections, the law doesn’t prevent agencies from immediately reporting it to credit bureaus. “It doesn’t matter that it was a mistake. It can affect your credit,” she says.

Set up a payment plan

Most medical bills are fairly small, says Lauren Rode, bankruptcy attorney with Consumer Action Law Group in Los Angeles. “If you get a small medical bill, instead of ignoring it just pay it,” she says.

Be clear with the collection agency that you want the account completely removed, not reported as paid, Detweiler says. “That doesn’t help your credit score. Paid or unpaid, a collection account is negative.”

If you can’t afford to settle the bill, negotiate a payment plan with the collection agency, suggests Christina LaMontagne, vice president of health for NerdWallet, an online financial information company

Just make sure you stick with your payment plan. Otherwise, LaMontagne says, “If something goes wrong and you’ve missed a payment it becomes a graver situation.” At that point, the collector can demand that you repay your debt in full or file a lawsuit against you to collect the funds.

File for bankruptcy

In Davis’ case, being $400,000 in the hole left him with few choices. “It was quite catastrophic,” he says of his debts. So he eventually filed for bankruptcy.

That can be a great option for consumers, Rode says. “It’s a good thing for them to file and start over again.” All medical debt is eliminated in a bankruptcy filing.

And bankruptcy accomplishes something else that surprises people, Rode says. “It boosts your credit” almost immediately because it eliminates your debts, she says. But the filing remains on your credit report for eight years, which can make securing a loan to buy a house or car difficult.

Filing for bankruptcy gave Davis a way out of crippling debt and onto a new life, he says. “I’ll be able to start over because of this.”


Free credit report: and offer free credit reports.

Legal help: Contact the Consumer Action Law Group at or by phone at (818) 254-8413.

Complaints: Contact the Consumer Financial Protection Bureau at or your state’s attorney general’s office.

Collections information: Call California Assn. of Collectors’ consumer hotline at (800) 316-2262 or visit

Zamosky writes about healthcare and health insurance.