What Happens When People Are Sued Over Unpaid Medical Bills?

Posted on May 11, 2016 at 12:00pm by
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In a recent article published by The Daily Beast, the consequences of defaulting on hospital bills are described in great detail. The article discusses Credit Management Services, a Nebraska collection agency notorious for filing lawsuits against poor families who have defaulted on medical debts. One family had an 8-year-old daughter with kidney failure who required multiple surgeries.

As a poorer family, the parents could not afford to pay the tens of thousands in hospital bills and were sued eight times by the company after defaulting. Their story is only one of many, and Credit Management Services has built a reputation for filing more lawsuits against debtors than any other debt collection agency in the U.S.

Credit Management Services has sued families for $60 worth of delinquent medical bills. Why would a collection agency bother with such tiny bills? Collection agencies are like many other types of businesses, which means there is heavy competition to acquire new clients (hospitals in this case). Consumers who are already struggling financially end up paying the price for this competition through wage garnishments.

How Wage Garnishments Can Affect Your Finances

After collection agencies sue consumers, they can garnish a certain percentage of their wages (in most states). Wage garnishments can cause consumers to default on other debt obligations, such as mortgages or student loans. In Kansas, creditors can garnish 25 percent of wages for medical bills. Missouri allows creditors to garnish 10 to 25 percent of wages depending on whether someone is the head of a household.

If you are being sued over unpaid medical bills, you may have options. Filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy can temporarily halt creditor actions, including wage garnishments, by issuing an automatic stay. An automatic stay can give debtors time to reorganize new payment plans or discharge medical bills.

The Kansas City bankruptcy attorneys at The Sader Law Firm are dedicated to helping debtors find ways to reduce or discharge medical bills.