When a 2016 study uncovered that Americans owed $81 billion to medical debt collectors, it was shocking. But a new report from the Journal of American Medical Association released this year revealed the problem is nearly twice as bad. In reality, Americans owe $140 billion. Roughly one in five people in the U.S. have at least one bill that’s gone to collections and unfortunately, the problem just keeps getting worse.

If you’re among those that are being hounded by medical debt collectors, it may be time to consider debt settlement. It can be an effective solution when you simply can’t afford to pay what they say you owe. Read on to learn how to decide if debt settlement is right for you and what steps to take to settle medical bills effectively.

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Before you settle your medical debt…

You can only settle a medical debt if it’s already in collections. Use these methods to prevent it from getting there in the first place:

Review your bill for accuracy

Is everything on your bill correct? Check every line item and ensure you actually received all procedures listed. Don’t be afraid to ask for clarification if something doesn’t seem right.

Ask about a payment plan

If you know you can’t pay your medical bill all at once, ask your doctor’s office if they can set up a payment plan for you. You can pay off everything you owe in small installments. Then your bill will never go to collections and become medical debt.

Negotiate your bill

You may be able to negotiate your bill directly with your healthcare provider. Explain your situation and see if they can go lower. Then you can either pay off everything at once or try to set up a payment plan for the new amount.

Try not to feel ashamed about asking for a lower price. There’s nothing wrong with being open about your financial situation. “American culture does not embrace negotiation except in very specific large purchases,” says Deb Gordon, author of “The Health Care Consumer’s Manifesto.” “Culturally, most Americans are incredibly averse to negotiating, so that creates a barrier. In a healthcare setting, it doesn’t seem possible. It seems so far away from our expectations that people don’t even think of it. It would never occur to most people, at least the ones that I spoke to.”

Gordon’s anecdotal evidence was proven in our 2020 medical debt survey. Sixty percent of respondents said they did not negotiate their medical bills.

60% of those with medical debt said they've never tried to negotiate their bills.

Consider a medical credit card

Medical offices sometimes offer credit cards specifically for paying medical bills. They usually have little to no interest for a period of six to 12 months. As long as you can pay off the bill in that time, this method can work. But if you don’t pay it off within the promotional period, you will get hit with a high interest rate.

Argue for an income-driven hardship plan

This plan’s monthly payments are determined by your income level. If your income is low enough to qualify, this is a good option.

How does medical debt settlement work?

It works the same way as any other type of debt settlement: you make an agreement with the creditor (or in this case, the collector) to pay less than what you owe. This comes with its own upsides and downsides.

Pros and cons of medical debt settlement

Pros of Settlement Cons of Settlement
You’ll get rid of your medical debt fast without having to file for Chapter 7 bankruptcy. Your settled medical debt becomes a negative item on your credit report. It stays there for seven years.
On average, you will pay only 48% of what you owe. Credit score damage is basically inevitable.
It’s not as complicated and expensive as bankruptcy. You could get scammed. The medical debt settlement industry has its fair share of scammers.

How To Settle Medical Debt In Collections, step-by-step

Step One: Medical Debt Statute Of Limitations

The first thing you need to do is check if your debt is still within the statute of limitations. This is the period during which a lender can still take you to court for what you owe. Find out if you are still within this period before you pay your lender anything. If the statute of limitations still applies, continue to step two.

Step Two: Negotiate Medical Bills

Now is the time for negotiation. “Usually, the time you end up negotiating a settlement is after the debt is either charged off or sent to collections,” says Gerri Detweiler, credit expert and Debt.com contributor. “Then you’re negotiating it like any other bill.”

Choose to either settle your medical debt yourself or work with a settlement company. Negotiating medical debt settlement on your own means working with the collections agency to lower the amount of your debt you have to pay back. Offer to pay a percentage of your debt and enter into a settlement agreement. You may be able to make monthly payments on this settled amount until it’s paid off.

Working with a debt settlement company is a little different. Basically, they negotiate with the debt collectors on your behalf and you make payments to the settlement company instead of to the collection agency directly. Going this route can be especially helpful if you have multiple medical debts (or any other unsecured debts besides student loan debt) that you need to eliminate.

If you do it yourself…

Reach out to the collector and make an offer. They will probably make a counteroffer, and you can go back and forth until you reach an agreement as to how much you pay. The collector will write up the terms of the settlement agreement and both parties will sign.

If you work with a debt settlement company…

Working with a settlement company means they will do all the negotiating for you. Once you sign up with them, you work with the company and stop communicating directly with the collector.

Step Three: Agreement Terms

As long as you pay as agreed, you should be in the clear. If you can’t make a monthly payment for whatever reason, call and try to renegotiate. This might work, but probably only once. You can’t call to renegotiate every month.

What to expect after settling your medical debt

After you settle, expect a lower monthly payment. After all, you agreed to pay less than what you owe. If you’re working with a debt settlement company, you may have to pay fees as well.

Will settling a medical debt hurt my credit?

When you first get your medical bill, it’s not a debt that will show up on your credit report. It’s just a bill. However, when you fail to pay it on time, your medical provider could send that account to collections as a debt. This collection account will show up on your credit report, not the medical bill. Nothing about your personal health records will be on your report.

If you’re having trouble paying off this debt, you may choose to enter into a debt settlement program. There are some DIY settlement methods, but they can be risky, so we recommend finding a reputable settlement company.

In general, debt settlement may hurt your credit score and appear on your credit report. When the account is paid off, it will stay on your credit report for seven years, though there are ways to get around this. When it comes to medical bills, an account will show up on your credit report if you miss your due date and the medical debt is sent to collections. Even then, it will only show up after it has been in collections for 180 days. This gives you plenty of time to deal with the debt collections agency and prevent it from ever becoming a negative item on your credit report. If your collections account is paid by your insurance company, it’s removed from your credit report right away. This is because of the National Consumer Assistance Plan enacted by all three credit bureaus in 2015.

If the damage has already been done and you need help fixing your credit, we recommend that you go through a credit repair service.

How will settled medical debt show up on my credit report?

These accounts will show up as “settled” accounts. However, there are a couple ways you can negotiate to lessen the credit damage a “settled” item can cause.

First, you can negotiate for the account to be listed as “paid in full.” This looks much better than “settled,” which reveals you paid less than what you owed.

Second, you can negotiate to re-age your account. Re-aging removes old delinquent payments from your credit report.

Can I use “pay for delete” to get medical debt off my credit report?

“Pay for delete” is a method by which consumers can pay to have a settled account removed from their credit report. It’s not very reliable and can be hard to accomplish, especially if you settled on your own. Seven years seems like a long time for an account to stay on a credit report. But with every year that passes, the negative impact of the account lessens.

It may also be unnecessary. If your insurance company paid off your collections account, reporting agencies will remove it from your credit report immediately without you requesting it. This is because of changes made by the National Consumer Assistance Plan mentioned above.

Are there more options besides debt settlement?

medical debt settlement; bottle of pills on top of a dollar billIf you have a good credit score that you want to maintain, you may want to avoid debt settlement since it could negatively affect your score. Don’t worry – there are more options besides settling your medical debt.

Debt Consolidation Loans

You can use a debt consolidation loan to pay off all your medical debt at once with a lump sum. This unsecured personal loan will come with an interest rate, but it’s better than letting your unpaid medical bill linger in collections.

Payment Plans

Before even considering debt settlement, call the original service provider to discuss setting up a payment plan that will allow you to pay off all of your medical debt. Paying in full is better for your credit than settling.

Credit Counseling

Certified credit counselors can help you decide which debt relief method is best for your financial situation. They can also help you enroll in a debt management program (DMP). A DMP consolidates your monthly payments and, unlike debt settlement, you pay off everything you owe.


If your medical debt has put you in a really bad situation, bankruptcy is not something to be afraid of. You will get rid of the debt fast and start building toward a better financial future.

Don’t risk your financial well-being trying to fix your credit on your own. We can connect you to the right credit repair service for you!

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NOTE: Watch out for medical debt settlement scams

Medical debt can put you in a vulnerable state, making you more likely to believe the lies of someone claiming they can get you out of debt for “pennies on the dollar.” This is almost never true. Debt settlement scams are unfortunate things you need to watch out for when trying to settle medical debt. You also need to keep your eyes open for signs of medical identity theft.

Article last modified on May 1, 2023. Published by Debt.com, LLC


Gerri Detweiler

Consumer & Small Business Finance Expert