Ask The Money Coach

Posts Tagged ‘collections’

If you are already more than 30 days delinquent in paying a debt such as a credit card bill, chances are the account has already been reported to the three main credit bureaus: TransUnion, Experian and Equifax. But you don’t have to do any guesswork about this. Nor do you have to take the collection agency at its word — regardless of whether or not it’s saying the report has been reported or hasn’t been reported. There’s a sure-fire way to know what’s on your credit report. It’s simply by taking advantage of your rights to get a free copy of your credit files from each of the “Big 3″ credit bureaus I previously mentioned. Just go online and get your credit reports and see for yourself. Look particularly closely at any records for “collections” or “public accounts.”

To get your free credit files, just go to: www.AnnualCreditReport.com.

Regarding your other question, I think it’s usually faster, easier and sometimes less financially costly to deal directly with creditors — as opposed to collection agencies. Those bill collectors often tack on additional fees, penalties, and other charges – expenses your creditors may be willing to waive.

It’s kind of odd that American Express wouldn’t be able to track down this old debt that you had – especially considering it wasn’t chump change. It’s very likely, though, that the $12,000 was assigned to a collection agency or simply written off as uncollectable – especially since it was apparently more than three years ago and you were just 20 years old. As you were/are a college student, I’m assuming you weren’t making big bucks back then (or now) and Amex may have known that their chances were between slim and none, in terms of getting you to pay back what you owed. What to do now? Pull each of your credit reports from Equifax, Experian and TransUnion. You can get them online free of charge via www.annualcreditreport.com. See if that Amex debt shows up on your credit reports as a collection account, charge-off, judgment, or anything else negative. If not, do nothing. If so, contact the creditor/collection agency listed only if you are financially prepared to begin a repayment plan to pay off what you owed. Otherwise, do nothing.

The Statute of Limitations on Credit Card Debt

Lastly, here are a few ways to check the statute of limitations in your state. Each state has different statutes of limitations for past-due debts, depending on if the debt was based on a written contract, an oral contract, a promissory note, or an open account. Credit cards are usually categorized as open accounts. The statute of limitations for credit card debt ranges from 3 to 10 years, based on where you live. You can click the following link for a state-by-state list of statute of limitations. themoneycoach1.wordpress.com/2009/09/14/statute-of-limitations-on-debt/.

Alternatively, to check the statute of limitations on debts in your state, contact your State Attorney General’s Office or go to www.naag.org and click “The Attorneys General”. I checked for Maryland, since you mentioned that state and I believe that is where you live. You are correct that the statute of limitations there is three years. All the more reason, as I suggested, to just do nothing about that debt. Chances are no one is contacting you about it because the statute of limitations has expired and the debt is no longer legally enforceable.

Your Credit Rating

This does not mean, of course, that it can not still appear on your credit report. That’s another matter entirely. Negative information, such as late payments or collection accounts, can stay on your credit report for 7 years. If this info is on your credit report, rest assured knowing that because it is more than 2 years old, it is likely doing far less damage to your credit rating than it probably did more than three years ago when the account first went delinquent.  So if I were you, I wouldn’t worry excessively about it.

If I understand you correctly, you were covered by health and/or medical insurance but a medical company accidentally filed your claim with the wrong company – or under the wrong insurance plan. Either way, the mistake was clearly not yours and you did, in fact, have insurance coverage. You also stated that your credit score dropped by 80 points due to this error. Based on the scenario you described, yes, in all likelihood your credit score will increase substantially once this matter is cleared up – assuming there are no other changes to your credit profile. By changes, I mean, you don’t add any substantial new debt to your credit cards, open new accounts, miss any other payments, etc. In addition, there are several other steps you can take to safeguard yourself. Read more tips below.

What to Do Next

To stay on top of this matter, do these four things:

1) Call your insurance company regularly

Talk to someone in the accounts payable department or whoever is handling incoming claims. Find out the status of your claim and ensure that it gets prompt attention. Don’t be a pest, but stay in constant contact with them. Call once a week for status updates. If you can, get a letter in writing, stating the date the claim came in and if it was paid partially, or in full.

2) Follow up with the medical company that filed the claim

This is the entity that seems to have made the initial error that caused your credit report to be marred and your credit score to drop. Unfortunately, it’s also the organization that will ultimately have to contact the credit bureaus to request that the collection account be removed. So treat them cordially when you call. But politely demand that they not drop the ball. Ask that they fix their mistake and remedy your credit reports with Equifax, TransUnion and Experian – by deleting all references to the account. If they just change it to “Paid Collection,” “Settled,” or something like that, it won’t help your credit score.

3) Monitor your credit

Start regularly monitoring your credit reports to watch for when the collection record drops off your credit files. FreeCreditReport.com and myFico.com both offer helpful credit monitoring services.

4) Document everything

If something goes amiss, or that collection account is not removed from your credit reports in a timely manner, you want to have proof of what went wrong. So keep a journal or log of everything. Document the names of people you talk to; maintain detailed notes about the dates of phone calls and written correspondences; and keep track of what anyone says with regard to your situation. This information will be valuable if you have to dispute the collections account with the credit bureaus.

Lastly, know that the law is on your side. Under the Fair Credit Reporting Act, credit information that is outdated or erroneous is not permitted to be entered on your credit reports.

With medical collection activity on the rise, it is definitely possible that a hospital, clinic or healthcare provider could come after you to pay off healthcare bills incurred by your former spouse. In fact, in many states, healthcare providers use common law doctrines to force spouses of patients to pay outstanding medical debts. Even if you don’t live in a common law state, many states consider a wife or husband responsible for a spouse’s medical bills, provided the two were living together when the medical bills were generated. That’s the case in New Jersey, where I live. Here, the Supreme Court has ruled that both spouses are liable for the “necessary” expenses incurred by the other while living together; and medical services are considered “necessaries.”

Fortunately, there are some efforts underway to safeguard spouses (and ex-spouses) when a wife or husband has racked up big medical bills. For example, many consumer protection agencies advocate exempting spouses from medical debts altogether.

What Your Former Spouse Should Do

Meantime, to protect yourself, talk to your former wife (if that’s possible) and encourage her to set up a repayment plan for her medical debt. Suggest that she review her medical bills closely to make sure she wasn’t overcharged or double-billed for anything. And share with her the resources listed below. Ultimately, of course, what your ex-spouse does or does not do is out of your control. But here’s what you can control.

How to Protect Yourself

First off, keep close tabs on your own credit files. Signing up for a good credit monitoring service is a way to do this. (I use credit monitoring from FreeCreditReport.com and myFICO.com). Unpaid medical bills don’t usually appear in your credit reports. But if they go into collections, then those accounts will be listed in your Equifax, Experian and TransUnion credit files. So be especially watchful for any collection accounts that may pop up in the future that you might have to dispute. The Federal Reserve reports that more than 50% of collection records and 20% of lawsuits that appear on credit reports are due to medical debts.

Aside from monitoring your credit, you should contact your health insurance company to inquire about any medical invoices that they didn’t pay. Perhaps there was an oversight, a missing claims form, or simply some information that you can supply that would cause the insurer to cover some of the outstanding healthcare bills.

Know the Worst-Case Scenario

Also, examine any of her healthcare bills you may have copies of – to see if there were clauses or fine print that obligated you or her (or both of you) to pay whatever was not covered by insurance. Sometimes, healthcare providers will spell out what recourse they may pursue in the event of non-payment. Aside from damaging your credit will collections, judgments or lawsuits, healthcare providers may try to garnish wages, seize assets or put a lien against your home. These are extreme tactics, and will certainly not be used in every case. But you need to be aware of all possibilities. In the end, how aggressively a healthcare provider pursues a debt will largely depend on the laws in your state, the amount of debt owed, and the extent to which the provider thinks they can shake money out your or your ex spouse.

Resources for More Help

Lastly, if you do get socked with your former spouse’s medical bills in the future, reach out to a variety of consumer organizations that can help you with this issue. Some groups that have fought wrongful medical billing practices include:

Access Project             http://www.accessproject.org

Bill Advocates              http://www.billadvocates.com

Consumers Union         http://www.consumersunion.org

Hospital Debt Justice    http://www.hospitaldebtjustice.org

National Consumer Law Center            http://www.consumerlaw.org