What New Yorkers Need to Know About Contesting Medical Debt

In 2022 New York enacted legislation that prohibited creditors from garnishing wages or placing liens on debtors’ primary residences when suing for medical debt. A year later in 2023, the state assembly passed the Fair Medical Debt Reporting Act, which prohibits hospitals, healthcare professionals and ambulances from reporting medical debt to credit agencies, and making it unlawful for consumer reporting agencies to collect medical debt or include it in a consumer report.

Prior to the passage of these laws approximately 740,000 New Yorkers had medical debt in collections, and thousands each year had their paychecks garnished or even lost their homes because of medical debt they could not pay.

Healthcare is not like other expenses. If you or a loved one is sick or injured you have no choice but to seek treatment, and with costs rising and health insurance providers consistently finding new ways to reduce or deny coverage, the financial burden can quickly become overwhelming. The good news is that if you live in New York medical debt cannot in most cases affect your credit score or cause you to lose your wages or your home.

However, this does not mean that debt collectors’ hands are tied when it comes to trying to collect your medical debt. They can still make collection calls, send you demands via mail, and file a lawsuit against you. In fact, because their options for collecting medical debt in New York are so strictly limited, debt collectors will often resort to litigation - and if you charged your healthcare expenses to a credit card, that debt can in most cases still be reported and sued on as normal consumer debt. If you have taken on a significant amount of medical debt, it is of the utmost importance that you take proactive steps to understand the situation, learn your options, and prepare for every eventuality.

Medicaid

Medicaid is a public health insurance provider for low-income New Yorkers jointly administered by New York State and the federal government. Eligibility is determined by family size and income relative to the federal poverty line.

If you have Medicaid, you cannot be sued for medical debt by a healthcare provider that accepts Medicaid, and even a healthcare provider that does not accept Medicaid cannot sue you for medical debt unless they informed you in writing that they do not accept Medicaid and that any treatment you receive must be paid out of pocket.

If you do not have Medicaid but may have been eligible at the time of treatment, New York State hospitals are required to help you file a Medicaid application and inform you when your application is approved or denied. If approved, Medicaid may be available retroactively to cover your treatment.

Hospital Financial Assistance

Hospitals in New York State are required by law to offer financial assistance to patients that cannot pay their bill before attempting to collect a debt. You can call the hospital billing department and request financial assistance at any time, even after your debt has been sent to collections. There is no immigration or citizenship requirement.

Credit Reports

Check your credit report regularly. A poor credit rating can disqualify you for loans, housing, and even employment, so it is vital to know what is being reported. The three credit reporting agencies – Experian, Equifax, and TransUnion – allow consumers to create a free account to check their credit, and offer tools to dispute erroneous information on their reports. If you see that a medical debt has been listed on your credit report, contest it immediately. It was illegally reported, meaning that by reporting the debt your creditor may have rendered the debt void and you may no longer have to pay it.

Dealing with Debt Collectors

If your debt has been sent to collections, don’t be intimidated by aggressive tactics. The Fair Debt Collection Practices Act, or FDCPA, prevents debt collectors from:

• Calling you at inconvenient times (generally outside of the hours of 8:00 am and 9:00 pm);

• Calling you at work, if you have informed them that this is unacceptable;

  Using abusive or profane language when communicating with you;

• Continuing communication after you have provided them with written notice that you do not wish for any further communication, except to advise you that collections are being terminated or that they are initiating a lawsuit against you;

• Continuing communication after you have requested verification of the debt in writing, before they have provided the requested verification (note: you must request validation within 30 days of becoming aware of the debt);

• Causing your phone to ring repeatedly or engaging you in repeated phone conversations with intent to harass, abuse, or annoy you;

• Contacting you by embarrassing media such as envelopes branded “Past Due” or “Collection Notice”;

• Publishing your name or address on a “bad debt” list;

• Reporting false information on your credit report, or threatening to do so;

  Engaging in misrepresentation or deceit in an attempt to collect a debt, such as impersonating an attorney or law enforcement;

• Threatening arrest or legal action that is not permitted or not actually contemplated;

• Communicating with anyone but you, your spouse, or your attorney about your debt; or

• Contacting you after you have advised them that you are represented by an attorney and provided the attorney’s contact information.

If a debt collector violates the FDCPA by engaging in any of the above prohibited activities while attempting to collect a debt from you, you may be able to bring a lawsuit against the debt collector.

You also have more leverage than you might think to negotiate a settlement for a lesser amount. Collections agencies buy bundles of debt for much less than the face value of the debt – sometimes as little as 5% of the principal amount. Medical debt, which is particularly difficult to collect for the reasons discussed above, is especially cheap. This leaves plenty of room to negotiate.

If you have a significant amount of medical or consumer debt in collections, reach out to us for a free consultation with an attorney. We may be able to help you negotiate a settlement.

Medical Debt Lawsuits

If you are being sued for medical debt, don’t panic. The first thing you should do is retain a lawyer. If you cannot afford a lawyer, you should have received a notice from the court with the Summons and Complaint which explains how to respond and legal aid resources that may be available to you at low or no cost. You can also defend the lawsuit yourself (pro se) if necessary.

New York State law strictly limits the income can be seized in a debt collection lawsuit, medical or otherwise. Some types of income, like Social Security (SSI), Social Security Disability (SSDI), and unemployment benefits, are entirely exempt. There are many potential defenses to a debt collection lawsuit, but understanding these defenses and navigating the litigation process without the assistance of an experienced attorney can be extremely difficult. If you are facing a medical debt lawsuit reach out today for a free consultation.