Is It Illegal to Send Medical Bills to Collections?
Learn your rights regarding medical bills.
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Medical Bills and Collection Agencies: Where the Law Draws the Line
Medical debt collectors operate under the same federal and state laws that govern all debt collection. Whether a medical bill can legally be sent to collections depends on factors such as how the debt was incurred, what notices were provided, and whether required procedures were followed.
Understanding these rules helps you know your rights and what steps to take if you receive a medical debt collection notice.
What Medical Debt Collection Involves
Medical bills can be sent to collection agencies if they remain unpaid after the provider has tried to collect the payment you owe. This usually means the debt is “sold” or given to a third-party company. That company will then try to collect the money from you.
When Sending a Medical Bill to Collections is Legal
Sending a medical bill to collections is not inherently illegal if the debt is valid and the collector complies with the law. Healthcare providers have the legal right to pursue unpaid bills. Debt collection itself is a lawful business activity.
Collection agencies are required to follow federal laws set by the Fair Debt Collection Practices Act (FDCPA) and California’s debt collection laws.
What Debt Collectors Have To Do Under Federal Law:
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Provide written notice of the debt within five days of first contact.
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Call only between 8 AM and 9 PM in your time zone.
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They can’t contact you at work if your employer prohibits it.
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They have to stop contact if you request it in writing.
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They can’t use false or misleading statements.
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They can’t harass or abuse you.
If a collector ignores these rules, it violates federal law. That’s when the process becomes illegal. The distinction matters. A valid medical debt can be legally collected. But the method used to collect it has to comply with all applicable laws. If it doesn’t, you have grounds to sue the collector for damages.
Additional Protections Under California Law
California law adds extra protections. For example, California limits how many times a collector can call you. Debt collectors cannot call you more than seven times within a seven-day period regarding a specific debt, nor within seven days of having a conversation with you. This is called the “7-in-7” rule.
What Debt Collectors Can Legally Do
Debt collectors also cannot use threats, curse at you, or contact third parties about your debt. However, they can legally do the following:
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Send written bills and collection notices.
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Call you to demand payment (within legal times and frequency limits).
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Report the debt to credit bureaus.
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File a lawsuit to get a judgment against you.
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Seek wage garnishment or bank levies if they win a judgment.
How Medical Bills Move to Collections
Understanding the path from medical bill to collections helps you know your rights. Each step follows a process.
The Initial Unpaid Bill Stage
When you receive medical care, the provider sends you a bill due within 30-60 days. If unpaid, they typically send reminder notices at intervals (often 30, 60, and 90 days), each with a payment deadline. During this time, the debt stays with the medical provider. No third party is involved yet.
You can still negotiate with the provider during this phase. Many hospitals and clinics offer payment plans or financial assistance programs. These options may help you avoid collections altogether.
The Decision to Send to Collections
After several months of non-payment, the provider decides next steps. Some providers write off small debts. Others send the bill to an internal collections department. Eventually, the provider may sell the debt. They transfer it to a third-party collection agency. The agency pays the provider a percentage of the money collected.
This is when the debt officially enters the collections system. At this point, the collector has legal authority to pursue payment.
How the Debt Enters Your Credit Report
Once a debt goes to a collection agency, it appears on your credit report. This happens within 120 to 180 days. The entry shows the original amount and the name of the collection agency.
Medical debt collections damage your credit score. The impact can last up to seven years. This affects your ability to get loans, credit cards, and sometimes housing.
California law requires accuracy. If the debt information is wrong, you can dispute it. The collector has to verify the debt or remove it from your report.
Statute of Limitations
Under California Code of Civil Procedure § 337, the statute of limitations for medical bills is 4 years from the date the contract was broken (e.g., failure to pay). This means a collector can sue you within four years of the last payment or acknowledgment of the debt.
After four years pass, the debt is time-barred, meaning the collector cannot win a judgment. However, the collector can still call and ask you to pay. If you make a payment or admit the debt, you may restart the clock.
Bankruptcy For Medical Bills
If collection activity becomes overwhelming, bankruptcy may be an option to stop garnishment, eliminate the debt, or create a repayment plan. Chapter 7 bankruptcy can discharge most medical debt entirely. Chapter 13 bankruptcy can reorganize medical debt into a manageable plan.
Your Legal Rights When Medical Debt Goes to Collections
The law gives you specific protections. You have rights whether you owe the debt or not.
Your Right to Receive Proper Notice
Collectors are required to send you a written notice of the debt. This notice should arrive within 5 days of the first contact. The notice should include the amount of the debt, the creditor’s name, and your rights.
The notice has to tell you that you can request verification. It should also explain how to dispute the debt. It must also state that the debt will be assumed valid if you don’t respond.
You have 30 days from receipt to request verification. If you request it, the collector should stop collection efforts until they provide proof. This is your chance to challenge accuracy.
Your Right to Dispute the Debt
You can dispute a medical bill debt for several reasons. The amount might be wrong. The debt might belong to someone else. The service might have been covered by insurance. The bill might have already been paid. The statute of limitations might have passed.
To dispute, send a written request to the collection agency. Use certified mail with a return receipt. Keep a copy for yourself. The collector has 30 days to respond with proof.
Your Right to Stop Contact
Under California law, you can demand that collectors stop contacting you. Send a written request by certified mail. The collector is obligated to stop all communication except to confirm they’ll stop or to say they’re taking legal action.
Collectors cannot ignore this request. Continuing to contact you after this demand violates state and federal law. You can sue for damages if they continue.
You can also request that they only contact you through your lawyer.
Contact Chang & Diamond, APC, If You’re Facing Medical Collections Now
If you have questions about a medical bill that has been sent to collections, you may want to speak with Chang & Diamond, APC about your situation. We can help you better understand your rights under federal and California law, as well as the options that may be available based on your specific circumstances.
Contact us today and schedule a free, initial consultation.
Frequently Asked Questions About Medical Debt and Collections
1. Can a hospital send my unpaid medical bill to a collection agency without notifying me first?
Hospitals and medical providers need to follow specific notification rules before sending debt to collections. Under the Fair Debt Collection Practices Act, creditors should provide written notice before taking collection action. California law also requires creditors to send you a notice at least 30 days before reporting the debt to a credit bureau.
2. Does a medical bill in collections still need to meet the standard validity requirements of other debts?
Yes. A medical debt in collections should still be valid and accurate, just like any other debt. Under the Fair Debt Collection Practices Act, you can request written proof of the debt within 30 days of their first contact. If the collection agency cannot provide verification, they should stop collection efforts. Medical billing errors do happen, and collections don’t erase those errors. You have the right to challenge the accuracy of the debt regardless of its collection status.
3. Can a medical debt be sent to collections if the bill is still within California’s statute of limitations?
A debt can be sent to collections at any time during the statute of limitations period (typically four years from the date of last payment or acknowledgment). However, just because a debt is within the statute of limitations doesn’t mean it’s uncollectable—collectors can still pursue it legally. Time limits matter for lawsuits, not for the initial collection process.
4. Are medical providers in California required to offer payment plans before sending bills to collections?
California law doesn’t require medical providers to offer payment plans before pursuing collections, though many do so as a business practice. However, federal law and some state rules require certain disclosures about payment options.
5. If I file bankruptcy while my medical debt is in collections, does the collection activity stop?
Yes. Filing for bankruptcy triggers an automatic stay, a court order that stops most collection activities immediately. This includes calls from collection agencies, lawsuits, and wage garnishments.