California has enacted strong consumer laws that ban most medical debt from appearing on your credit report starting in 2025, but this doesn’t erase the debt itself. You still need a proactive strategy to manage outstanding bills. This involves demanding an itemized bill to check for errors, applying for the hospital’s mandatory financial assistance programs, and knowing your legal rights when dealing with collection agencies.
Key Takeaways:
- A new California law prohibits most medical debt from appearing on or negatively impacting your credit report, making it less of a factor in lending decisions.
- You must demand an itemized bill and apply for financial aid (charity care), as required by state law, before engaging in payment or negotiation with the provider.
- Although credit reporting is restricted, collectors can still sue. If served with a lawsuit, you must immediately file a legal Answer to avoid a default judgment, often requiring a consumer attorney.
When unexpected illness hits, the last thing you should worry about is going broke. Yet, for countless Californians, a medical bill can feel like a financial disaster, ruining credit and stalling major life goals.
The good news? California has some of the strongest consumer protections in the country, especially when it comes to medical debt. If you are struggling with medical bills, you have powerful rights and strategies to manage the debt and protect your financial future.
This guide breaks down exactly how to handle medical debt in California, from the moment you get the bill to dealing with aggressive collectors.
Good News: Medical Debt Can’t Ruin Your Credit (Anymore)
This is the most critical piece of information for every Californian: a new state law has fundamentally changed how medical debt impacts your credit score.
Effective January 1, 2025, California banned healthcare providers, collection agencies, and credit reporting agencies from including most forms of medical debt on a consumer’s credit report. They are also prohibited from using existing medical debt on a credit report as a negative factor when making a credit decision.
What does this mean for you?
- Existing Medical Debt: It should be removed from your credit reports. You need to check your reports to ensure this happens.
- Future Medical Debt: Any new bill generally cannot be reported to the credit bureaus.
- The Debt Still Exists: The law removes the debt from your credit report, but it does not erase the bill. You still owe the debt, and a collector can still try to collect it, or even sue you—so you can’t ignore it.
California’s law acknowledges that people don’t choose to get sick, and that an unexpected medical event shouldn’t define their creditworthiness.
Your 3 Essential Steps When a Bill Arrives
Even with the new credit protections, you must act strategically the moment you get a bill to dispute errors, negotiate, and avoid collections or a lawsuit.
1. Don’t Just Pay the Summary: Demand an Itemized Bill
Medical billing is notoriously complex and full of errors. The first bill you get is often just a summary. You can’t dispute what you can’t see, so request a detailed, itemized bill from the provider immediately.
When you review the itemized bill:
- Compare to Your Explanation of Benefits (EOB): Match the codes and dates on the bill against the EOB you received from your insurance company. This helps you spot balance billing errors where you might be improperly charged for a service.
- Check for Duplicate Charges: Did they charge you twice for the same medication, lab test, or procedure? It happens all the time.
- Verify Service Codes: Look up the common CPT or HCPCS codes listed on the bill. Make sure the description matches the service you actually received.
2. Apply for Financial Assistance or Charity Care
California has laws that require many hospitals, especially non-profit ones, to offer financial assistance or charity care to low- and moderate-income residents. You could be eligible for a significant discount or even complete forgiveness of your bill.
- Hospital Requirement: Hospitals must have a clear charity care policy and must screen you for eligibility before sending your bill to collections. They often have a generous income limit for eligibility, sometimes up to 400% of the Federal Poverty Level.
- Ask Directly: Call the hospital’s billing department and ask for the financial assistance application. Hospitals cannot sell your debt to a debt buyer unless they determine you are ineligible for financial assistance or you have not responded to their efforts to offer assistance for 180 days.
3. Negotiate the Balance
If you don’t qualify for charity care or have a remaining balance, you can still negotiate. Hospitals and medical practices often prefer to receive some money directly rather than spending time and resources trying to collect.
- Go for a Lump Sum: If you can afford a single, large payment, offer to pay a percentage of the total debt (e.g., 50–75%) to settle the account in full. Be sure to get the agreement in writing before you make a payment.
- Request an Affordable Payment Plan: If you can’t make a lump sum payment, ask for a low- or 0% interest payment plan that fits your budget.
Dealing With Collection Agencies
If your bill goes to a third-party debt collector, you have even more legal rights under both the federal Fair Debt Collection Practices Act (FDCPA) and California’s Rosenthal Fair Debt Collection Practices Act.
Your Right to Debt Validation
When a collector first contacts you, you have a crucial 30-day window to request debt validation.
- Send a Letter: Write a letter to the collector demanding they validate the debt. Send it via Certified Mail with a return receipt requested. This creates a paper trail.
- Stop Collection: Once the collector receives your validation request, they must stop all collection efforts until they send you written proof the debt is valid (which includes documentation like the name of the creditor and the amount owed).
If they cannot validate the debt, they must stop trying to collect it.
The 180-Day Rule
In California, providers and collectors are generally prohibited from taking any negative collection action, like reporting negative information to a credit bureau (though this is now banned anyway) or filing a lawsuit, until 180 days after the initial bill was sent. This gives you time to sort out insurance, apply for assistance, and dispute the bill.
What to Do If a Collector Sues You
Even with California’s strong consumer protections, a collector can still file a lawsuit against you to get a judgment. Do not ignore a lawsuit. If you fail to respond to the court documents (the summons and complaint) by the deadline, usually 30 days, the collector will automatically win a default judgment.
A judgment allows the collector to potentially:
- Garnish your wages.
- Levy your bank accounts.
- Place a lien on your property.
If you are sued, you must file an Answer with the court before the deadline. This is where you can raise your legal defenses, which might include:
- The amount is incorrect or violates the No Surprises Act.
- The debt is past the statute of limitations for collection (usually four years for a written contract in California).
- The provider violated their requirement to offer you financial assistance.
Navigating a court proceeding, especially one involving complex medical billing codes and consumer laws, is extremely difficult to do on your own. This is a clear sign that you need legal help.
When to Bring in the Professionals
Dealing with medical debt is stressful because you are fighting a battle on three fronts: with the healthcare provider, with the insurance company, and potentially with the debt collector.
An experienced consumer protection attorney can level the playing field. They can:
- Review Your Bills and EOBs: They can quickly identify illegal charges, billing errors, and insurance denials that you can appeal.
- Handle Debt Collectors: Lawyers know the FDCPA and the Rosenthal Act inside and out. They can enforce your validation rights and stop illegal harassment. In some cases, if a collector breaks the law, the attorney can sue them on your behalf, which might result in the collector paying you damages.
- Defend You in Court: If you face a lawsuit, an attorney ensures your legal rights are protected and raises every possible defense, saving you from a devastating default judgment.
You didn’t ask for the illness or the bill, but you can choose to fight back effectively. Do not try to solve a legal problem with a phone call or a handwritten note. Fight with the law on your side.
Take Back Control of Your Finances
Don’t let overwhelming medical debt keep you awake at night or force you into a settlement you can’t afford. California law offers powerful tools to protect your credit and your savings. Your first step should always be to understand your rights.
If you are facing aggressive collection calls, confusing medical bills, or a potential lawsuit, you don’t have to go it alone.
Call today for a free consultation. Let’s discuss your specific medical debt situation and create a clear, legally sound plan to protect your assets and get your finances back on track.
