Not giving in to unfair doctor bill? It’s going to cost you!

This post originally appeared March 9, 2017 on CreditCards.com as “‘Refusing to pay bills on principle has consequences

By Barry Paperno

Dear Speaking of Credit,
I have four medical bills I tried disputing with the family practice they originated from. The doctor coded my visit in such a way that I disagreed with. I had moved to a new city and was simply establishing a relationship with a local practice in case I needed a doctor. He took my medical history and then billed the visit as if he diagnosed my illnesses. I was floored when I received the bills.

However, I didn’t get anywhere with the practice when I responded to their charges. They eventually went to collections because I refused to pay them. They are still showing active in collections, and my credit score took a serious hit because of them. What do you suggest I do to remedy this situation? I’m so frustrated! – Mary

Dear Mary,
I’d be frustrated, too! And while you haven’t shared the amount of these bills, this major misunderstanding is clearly going to cost you plenty – both in money and in your credit score.

Unfortunately, now that the bills have been assigned to a collection agency and appear as a collection account on your credit reports, the burden of proving you don’t owe them falls on your shoulders. There are a few different ways to put this debt to rest with the goal of paying as little as possible and doing what you can to save your credit score.

Pay for delete
Since you’ve gotten nowhere with the doctor and place a high priority on your credit rating, you may be able to convince the agency to remove the collection items entirely from your credit reports in exchange for payment in full or, better yet, a settlement for less than the total due.

This solution offers the best outcome for your score, as once the collection is removed, it will be as if none of this never happened. Should the agency agree on such a plan, be sure this and all communications are in writing. Arrangements like this tend to be made on a case-by-case basis, not as standard policy, and you may need to follow up later with the agency or the credit bureau to ensure they keep their promises.

Pay for a ‘paid-collection’
If the collection agency refuses to delete the collection item as part of a settlement or payoff, your best option may be to pay in full or settle with the agency anyway to resolve the matter.

The bright side to this option is having your credit reports now describe the debt as a “paid-collection.” This improvement to your credit report will prevent future mortgage and other credit denials due to an unpaid debt. It will also keep the collection agency from suing you over the debt, which, if successful, would add a judgment to go along with the collection on your credit reports.

Unfortunately, this solution offers little likelihood of helping your score in the short run. While the newest FICO scoring model, FICO 9, ignores paid collections, most lenders use the older models that treat paid-collections no more favorably than the unpaid kind.

Small claims suit
You may still feel strongly enough in the merits of your case that you want to continue fighting for the elimination of that debt entirely. For a reasonable filing fee and without needing an attorney, you can have your day in court to challenge those bills before a small claims court judge.

If ruled in your favor, the judge can wipe out or seriously reduce the debt and order the removal of the derogatory credit reporting item. That’s if you win. But what if you lose? Should the decision go the doctor’s way and all attempts to come to a last-minute settlement before the trial fail, expect to pay the full billed amount and continue to see a paid-collection on your credit reports – and a low credit score.

None of the above
This approach comes with its own set of downsides. The agency is likely to continue with its frequent calls and letters threatening a lawsuit if you don’t pay. And though you have the right to make them stop by requesting they do so in writing, this tactic is more likely to accelerate a lawsuit then get them to back off, as the collector no longer has any other way to get you to pay.

Another failing with this plan is that your credit report will continue to show the debt as an unpaid collection. While, as already noted, an unpaid collection won’t necessarily hurt your score more than a paid collection, a mortgage or other lender isn’t likely to lend to you with an unpaid bad debt on your credit report – even if your score has recovered over time.

Sorry to say, these are your choices. Regardless of how you resolve this matter, that was one expensive doctor visit!

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