Collection agency claims it will reduce my outstanding hospital debt if I pay now

July 18, 2017

Dear Consumer Ed:

I just received a call from a collection agency concerning an outstanding hospital bill I owe for $1,100.  They said that if I pay within a week they’ll reduce the debt to $400.  Do they have the ability to do that, or do I have to worry about another agency contacting me in the future to collect on the difference?

Consumer Ed says: 

While you may be able to negotiate a lower payment with a debt collection agency, you do want to ensure the offer isn’t too good to be true. Before entering into any agreement you should first confirm that the debt is yours and that the particular collector has a right to collect the debt. You should also be able to quickly verify that the agency is a legitimate company with an online search of the company’s website, the Better Business Bureau, etc.

In many cases, the collection agency has purchased your previously past-due debt at a reduced rate from the original creditor. It’s likely they have purchased the debt for pennies on the dollar, meaning if your original debt was $1,100, they only need a fraction of that money to make a profit on the transaction (which may be why they are willing to accept $400 instead).

You should also be aware of the age of your debt because there are state laws known as “statutes of limitation” that place time limits on a creditor’s or collector’s ability to use courts to force you to pay a debt. If the statute of limitations on your debt has passed, then the creditor cannot get a court judgment against you (if you contest it). However, if you make a payment, or promises to pay, then the time resets to zero, starting a new period subject to valid court action. You can read more about statutes of limitation on debt at

In all of your dealings with the debt collections agency, you need to keep written records of everything that is discussed and agreed upon. When you finalize a payment arrangement or a debt settlement letter, get it in writing before you pay anything.The letter should indicate that such a payment fully satisfies the debt.There may come a time when a new collections agency will send you a statement confirming a balance due for the same debt, and if you saved the related documents, you can prove that it’s already been paid.

Keep in mind, if a portion of your debt is forgiven by the creditor, it could be counted as taxable income on your federal income taxes. You may want to consult a tax advisor or tax attorney to learn how forgiven debt affects your federal income tax.

Submit your own question to Consumer Ed.  Remember…we do not give legal advice. Always consult a lawyer about legal issues.