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Debt collection litigation disruptive to financially stressed patients

| May 26, 2016 | Personal Bankruptcy |

Medical debt is one of the most challenging forms of debt Americans face. Numerous studies have shown it to be among the most common forms of debt cited in bankruptcy, and it is also probably the form of debt that goes into collections the quickest. For those who have been struck by a medical crisis, it can be overwhelming to have to deal with debt collectors clamoring to be paid. This is especially the case when debt collectors initiate litigation against debtors.

A recent article published by ProPublica highlights the challenges medical debt litigation can present to families. Litigation is an aggressive way to collect debt, and while it may be a measure of last resort for many debt collection companies, it can be a serious challenge. As the article points out, the state where a debtor lives can have a significant impact on the likelihood of debt collectors filing lawsuits. 

Nebraska, the article points out, is one state where there is a significant amount medical debt collection litigation–in 2013, there was 79,000 lawsuits filed. One likely reason for the situation is that pursuing litigation in Nebraska is inexpensive, and collection companies therefore have less standing in their way to pursue litigation when it is possible to do so. A similar pattern can be seen in other states with lower filing fees. In many cases, litigation occurs over medical debts small enough that companies wouldn’t bother to sue in states where litigation costs are greater.

The stress that arises from aggressive debt collection tactics is something that can be addressed in the bankruptcy process. In our next post, we’ll look at this issue and what debtors can do when debt collection companies act illegally in the collection of debt.

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