Many Americans are concerned about the high cost of care if we get seriously ill with COVID-19. According to the Centers for Disease Control and Prevention (CDC), the median hospital stay for a COVID-19 survivor who is admitted is from 10-13 days. That is a big bill, even for many with insurance. For the uninsured or those with very high deductible plans, the debt could be crippling.
The Alabama Department of Insurance is currently working with health insurance issuers to provide relief for those insured and directly affected by the COVID-19 pandemic by waiving certain costs and 100% coverage to those Alabamians with medical costs from COVID-19. Visit this site, for specific details on how health insurance issuers in Alabama are helping to reduce out of pocket costs for those insured. Keep in mind though that these programs are only for those insured by these specific health insurance providers.
For those uninsured, if you face hospital medical expenses from COVID-19 and the hospital takes money for your medical expense via the CARES Act Provider Relief Fund, the hospital must agree to not come after you for the difference in what it was paid by the government and the costs to provide you coverage. To put this a different way, if the hospital that treated you attempts to be paid for your expenses by the federal government, it cannot come after you for the difference that you owe after the government pays it. The key is whether the hospital will seek to be paid by the government via the CARES Act Provider Relief Fund for the costs of treating you… if not, you are on the hook for the balance.
Local Medical Debt Statistics
But it turns out that COVID-19 is not only the medical debt concern facing people who may be in difficult financial circumstances–or whose finances have gone from bad to worse. A great many Americans were saddled with past-due medical debt long before the pandemic hit. That includes 22% of Tennessee households, 19% of households in Mississippi, and 16% in Alabama.
In Montgomery, Alabama, one local hospital, Jackson Hospital, sued over 1,000 people in 2019 with some lawsuits being for as little as $150.00. In some cases, those being sued by Jackson were not even aware that any money was owed to Jackson Hospital until the Montgomery County Sheriff served them with a lawsuit at their doorstep.
Though court activity has been limited due to coronavirus, and some medical facilities have temporarily stopped filing debt collection lawsuits against patients. Those orders are winding down, but circumstances are changing quickly. The Supreme Court of Alabama lifted Alabama limitations on in-person hearings on May 15, instead allowing presiding judges until August 15 to make the determination on whether to allow in-person hearings or not and Tennessee’s current orders terminate at the end of May. And even these measures do not protect those whose debt has already been reduced to judgment.
Some states have issued orders freezing seizure of bank accounts, wage garnishment, and certain other activities by debt collectors. Alabama has measures in place to temporarily protect against eviction and foreclosure, but no protection against other collection efforts. Some, like wage garnishments and orders attaching bank accounts, take time to wind their way through the system. That means for some, those orders are taking effect at the worst possible time, as many Americans are facing unemployment, a reduction in work hours, and increased expenses. ProPublica has reported horror stories from people in multiple states who have seen their wages garnished or money debited from their bank accounts since the pandemic started. One institution specifically named was Johns Hopkins University, which has been instrumental in COVID-19 modeling and data tracking.
When the federal government passed legislation to put cash in the hands of Americans struggling as the virus and the shutdown of non-essential businesses rocked the U.S. economy, they specifically protected those funds from certain types of collection. That is, they included a provision clearly stating that the federal government would not intercept those funds to pay delinquent student loan debt, nor absorb them to cover unpaid tax debt. The only type of garnishment order that would be enforced in the distribution of coronavirus stimulus checks would be those for the collection of unpaid child support.
There are even some protections for people in bankruptcy, or who file for bankruptcy. These funds from the government will not be considered income when calculating Chapter 7 eligibility. Chapter 13 debtors will not be required to surrender those funds to supplement their repayment plans. And, though Congress stopped short of making the funds exempt in a Chapter 7 case, direction from the U.S. Trustee discourages bankruptcy trustees from taking possession of those funds.
But, whether intentionally or through an oversight, the bill provides no protection from banks or individual creditors. That means for some, those much-needed funds land in a bank account, only to be seized to satisfy a judgment–or even to repay debt owed to the bank itself. As the first round of direct deposits arrived, USAA took heavy criticism for collecting outstanding balances from the stimulus funds. The banking and insurance company serves members of the U.S. military and their families, which undoubtedly increased the backlash. USAA quickly reversed its policy, and restored funds to its customers whose deposits had been applied to outstanding balances.
Some other banks, including Wells Fargo, Citi, and JP Morgan Chase have temporarily altered collection practices to ensure that their customers get the relief Congress intended. However, if you had an overdraft balance in the account your stimulus check was or will be deposited to, it is important to understand whether and how your bank is waiving collections. At Wells Fargo, for instance, a temporary credit will be applied for 30 days. That allows customers to spend or withdraw the stimulus funds, but if those funds are still in the account when that credit disappears, they will be applied to the outstanding debt.
Banks Have Less Leeway with Third-Party Debt
Unfortunately, these measures only help when the bank itself is the creditor. In that situation, the bank can simply decide not to exercise its rights. But, if a credit card company, medical provider or other creditor has a judgment and has attached your bank account, the bank may be legally obligated to seize those funds and transfer them to the creditor.
Managing Collection Efforts During the Pandemic
Debt collection has been a serious burden for many who have been thrown out of work in the past 60 days, and those issues may get worse as creditors, collection agencies and courts get back to business as usual. If debt collection is interfering with your ability to stabilize your finances during these difficult times, or you have an outstanding judgment or other debts that could damage your financial foundation, educating yourself is the best first step.
Mary Pool is a shareholder of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Faulkner University’s Jones School of Law. She has represented thousands of clients over her more than 11 years working in the bankruptcy field. Read her full bio here.