How do you settle a medical debt collection lawsuit?

Getting served with a lawsuit over unpaid medical bills can be both frustrating and scary, especially when you're already dealing with the aftermath of an illness or injury. It's a real issue millions of people are at risk of, though, as medical debt remains one of the most common reasons for debt collection lawsuits being filed. Roughly 20% of Americans have medical debt in collections, according to 2023 data and healthcare providers and collection agencies file thousands of lawsuits each year to recoup these debts. 

But as common as these lawsuits are, the stakes are real. If a creditor wins a judgment against you, either by default or otherwise, they can potentially garnish your wages, freeze your bank accounts or place liens on your property. The good news is, though, that unlike criminal cases, debt collection lawsuits are civil matters, and most medical debt lawsuits won't make it to trial because both parties benefit from reaching an agreement outside the courtroom.

That's why understanding your options for settling a medical debt lawsuit can save you thousands of dollars and help you avoid the serious consequences of a court judgment. So, how do you settle this type of debt lawsuit, whether you're facing a lawsuit from a hospital, doctor's office or third-party collection agency? That's what we will detail below.

Find out how to get help with your medical debt now.

How do you settle a medical debt collection lawsuit?

The first step in settling a medical debt lawsuit is responding to the lawsuit within the timeframe specified in your court summons, which is typically 20 to 30 days. Ignoring the lawsuit guarantees the debt collector wins a default judgment against you, which dramatically reduces your negotiating power. So, be sure to file an official response with the court, even if you believe you owe the debt, as this keeps the legal process open and shows you're taking the matter seriously.

Once you've responded, verify that the debt is legitimate and that the amount claimed is accurate. To do this, request debt validation from the debt collector, which forces them to provide documentation proving you owe the debt and that they have the legal right to collect it. Medical billing errors are surprisingly common, after all, and you may find there are duplicate charges, incorrect amounts or debts you've already paid that need to be disputed. If the debt collector can't provide proper documentation, you may have grounds to have the case dismissed.

You can also contact the plaintiff's attorney directly to try and negotiate a settlement before your court date. Debt collectors often accept settlement offers as low as 50% to 70% of the original debt because lawsuits are expensive and time-consuming for them, too. Before you reach out, however, make sure you're prepared to explain your financial hardship and make a realistic lump-sum offer based on what you can actually afford to pay. And, get any settlement agreement in writing before making payment to ensure that the debt will be satisfied in full and that the lawsuit will be dismissed with prejudice after you make the payment.

If you can't afford a lump sum settlement, you can try to propose a payment plan that works within your budget. While lump-sum settlements typically result in larger discounts, many debt collectors will accept structured payments rather than risk getting nothing if you file for bankruptcy. Whatever route you take, though, be sure to document everything in writing, including all communications, payment agreements and proof of payments once you start fulfilling the settlement terms.

Explore your debt relief options and find the right strategy here.

When should you get expert help with the settlement process?

If your medical debt lawsuit is part of a larger pattern of overwhelming debt, or if you're facing multiple collection actions, working with a debt relief expert might be worth considering. Debt relief companies specialize in negotiating with creditors and can often secure better settlement terms than borrowers who are negotiating alone, particularly when dealing with aggressive debt collection attorneys.

The big benefit of working with this type of expert is that they typically handle all communications with debt collectors and attorneys, which can reduce the stress and confusion of dealing with legal proceedings while you're already financially strained. They understand the legal landscape, know what debt collectors are likely to accept and can help you avoid common mistakes that weaken your negotiating position. 

Note, though, that debt relief assistance comes with fees, so before enrolling, make sure to understand the total costs, how long the process takes and the potential impacts on your credit score and any tax burdens. For straightforward cases with a single creditor and manageable debt amounts, you may find that you'll achieve similar results negotiating directly while saving on fees.

The bottom line

Settling a medical debt collection lawsuit requires prompt action, careful verification of the debt and strategic negotiation before your court date arrives. Whether you negotiate directly with the debt collector's attorney or work with a debt relief professional, getting a written settlement agreement and dismissal of the lawsuit protects you from wage garnishment and other collection actions.