Navigating patient balance collection laws by state has become increasingly complex for healthcare providers. What works in one state may violate regulations in another, creating compliance challenges for practices serving patients across state lines. Understanding these variations is essential for protecting both revenue and reputation.

Medical debt collection laws vary significantly across the United States. Some states aggressively protect consumers with strict limits on collection practices, while others provide fewer restrictions. For healthcare providers and revenue cycle managers, staying current with state-by-state collection regulations is critical for compliance.

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The landscape is changing rapidly. Recent years have seen an explosion of state-level activity addressing medical debt. Since 2021 alone, eleven states have enacted new consumer protections targeting medical debt collection. These laws address everything from credit reporting to wage garnishment, creating a patchwork of requirements that multi-state practices must navigate carefully.

At EZMedPro, we help medical billing companies and hospital systems understand and comply with patient balance recovery statutes. This comprehensive guide examines state medical debt laws, key restrictions, and practical strategies for compliant collections across all fifty states.

The Evolving Legal Landscape

Why States Are Taking Action?

Federal law provides a baseline for debt collection practices through the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA). However, these federal protections leave significant gaps. The FDCPA does not limit or prohibit the use of certain legal remedies like wage garnishment or foreclosure to collect medical debt.

State collection practice requirements fill these gaps. Recognizing that medical debt differs fundamentally from other consumer debt, states have enacted laws addressing the unique circumstances of healthcare billing. Unlike credit card debt incurred through voluntary spending, medical debt often results from unexpected emergencies beyond patients’ control.

The Federal Framework

Understanding patient balance collection laws by state requires familiarity with the federal framework that states build upon. The FDCPA prohibits deceptive and unfair practices but allows states to provide greater protections. As the CFPB has emphasized, state laws prohibiting furnishers from reporting medical debt to credit bureaus are generally not preempted by federal law.

Federal courts have consistently upheld state authority to exceed federal protections. The First Circuit rejected a challenge to Maine’s medical debt reporting restrictions, and the Ninth Circuit upheld Nevada’s 60-day waiting period for medical debt collection. These decisions confirm that states can enact stronger protections without federal preemption.

Recent Legislative Trends

The pace of state action has accelerated dramatically. Colorado and New York passed legislation in 2023 barring medical bills from credit reports. Rhode Island followed in 2025 with some of the nation’s strictest limits, banning credit reporting, prohibiting wage garnishment, and capping interest rates.

These trends reflect growing recognition that medical debt legal protections are necessary. The CFPB has documented that medical debt is less predictive of creditworthiness than other debt types and that billing errors are widespread. States are responding by removing medical debt from credit reporting systems entirely.

Key Restrictions Across States

Wage Garnishment Limits by State

Wage garnishment limits by state vary dramatically. Federal law limits garnishment to the lesser of 25% of disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage. However, some states provide stronger protections or prohibit garnishment entirely.

Five states ban wage garnishment for medical debt outright: Delaware, New York, North Carolina, Pennsylvania, and Texas. In these states, creditors cannot seize any portion of a patient’s paycheck to satisfy medical debt judgments. New Hampshire doesn’t ban garnishment but requires collectors to return to court for each paycheck, creating practical barriers.

Even in states that allow garnishment, the practice is widespread. A review of 1,200 Colorado wage garnishment rulings found at least 30% stemmed from medical care, with an estimated 14,000 cases annually where courts allow wage garnishment for medical debt.

Medical Debt Credit Reporting Restrictions

Medical debt credit reporting restrictions represent one of the fastest-growing areas of state regulation. Colorado, New York, and Rhode Island now prohibit credit bureaus from including medical debt in consumer reports. These laws recognize that medical billing errors are common and that credit reporting should not be used to coerce payment of potentially inaccurate debts.

The CFPB has strongly supported these state initiatives, noting that unpaid medical bills are “rife with unreliable information”. Common complaints include debt that was already paid, doesn’t belong to the consumer, or is otherwise incorrect. Providers often send bills to collectors with little documentation, enabling collection of potentially invalid debts.

Statute of Limitations for Medical Debt

Statute of limitations for medical debt determines how long creditors have to sue patients for nonpayment. These time limits vary significantly by state, typically ranging from three to ten years. After the statute expires, patients can raise the expiration as an affirmative defense to collection lawsuits.

Practices must understand these variations when collecting from patients in different states. Attempting to sue on time-barred debt violates the FDCPA and may trigger state law violations. Regular review of debt age by patient location is essential for compliance.

Interest Rate Caps on Medical Debt

Several states limit the interest that can accrue on medical debt. Rhode Island’s new law caps interest at the weekly average one-year Treasury yield, between 1.5% and 4% annually. This prevents the rapid accumulation of interest that can turn modest medical bills into insurmountable debts.

Other states have similar restrictions. Providers should verify applicable interest limits before adding interest to outstanding balances. Charging interest at rates exceeding state caps creates compliance exposure and potential liability.

Lien and Foreclosure Prohibitions

Lien and foreclosure prohibitions protect patients’ homes from medical creditors. Rhode Island now forbids executions or attachments against a debtor’s principal residence for medical debt judgments. This prevents the devastating consequence of losing one’s home over unpaid medical bills.

Other states provide similar protections through homestead exemptions that shield some or all home equity from creditors. Understanding these protections helps practices evaluate collection strategies and identify cases where pursuing home equity is legally prohibited.

Collection Waiting Periods

Collection waiting periods give patients time to address bills before facing aggressive collection. Nevada requires 60 days’ written notice before taking any action to collect medical debt. During this period, collectors cannot report debt, send repeated communications, or take adverse action.

The Ninth Circuit upheld this requirement against constitutional challenge, finding it provided greater protection than the FDCPA alone. Similar waiting periods exist in other states, requiring practices to delay collection activities until patients have opportunity to verify debt or seek financial assistance.

Patient Protections and Provider Obligations

Financial Assistance Policy Requirements

Financial assistance policy requirements at the state level exceed federal standards. While federal law requires nonprofit hospitals to have financial assistance policies, it lacks minimum eligibility requirements. Twenty-one states now require hospitals to provide financial assistance and set minimum standards exceeding federal requirements.

All but three of these states extend requirements to for-profit hospitals. These policies must be publicized and accessible, ensuring patients know financial help is available before accounts become overdue.

Charity Care Screening Mandates

Charity care screening mandates require providers to determine patient eligibility for free or discounted care before pursuing collection. The Commonwealth Fund found that only six states have reporting requirements robust enough to identify noncompliance and discriminatory practices.

Effective screening prevents inappropriate collection from patients who qualify for financial assistance. Practices should implement systematic screening before accounts move to collection, documenting eligibility determinations to demonstrate compliance.

Reasonable Payment Plan Definitions

Reasonable payment plan definitions vary by state but generally require terms that patients can afford. Some states specify minimum payment amounts or maximum plan durations. Others require interest-free plans for qualifying patients.

Offering reasonable payment plans serves both compliance and collection goals. Patients who can afford modest monthly payments are more likely to pay than those facing demands for full payment. Structured plans also demonstrate good faith that may matter in subsequent collection litigation.

Spousal Debt Transfer Prohibitions

Spousal debt transfer prohibitions protect spouses from liability for medical debts they did not incur. While federal law limits debt collectors’ ability to pursue spouses for others’ debts, state laws provide additional protections. Community property states have specific rules about when spouses are jointly liable.

Understanding these protections prevents improper collection from non-liable spouses. Documentation of which spouse received services and which spouse incurred debt supports appropriate collection targeting.

Protection from Aggressive Collection

Protection from aggressive collection includes limits on communication frequency, time of day contact, and prohibited practices. The FDCPA provides baseline protections, but states may impose additional restrictions. Some states limit how soon after service collection can begin or require specific disclosures.

Practices using collection agencies must ensure vendors comply with both federal and state requirements. Agency agreements should specify compliance responsibilities and include indemnification for violations.

State-by-State Variations

Northeastern States

Northeastern states generally provide strong patient protections. New York bars medical debt from credit reports and limits wage garnishment. Maine’s Medical Debt Reporting Act restricts when credit reporting agencies may report medical bills, surviving federal preemption challenge.

Connecticut is considering similar legislation. The CFPB has encouraged these efforts, noting that “states play a frontline role in protecting consumers”. Practices serving Northeastern patients must navigate some of the nation’s strictest collection limits.

Southern States

Southern states vary significantly in their approach. Texas prohibits wage garnishment entirely and has strong homestead protections. Other Southern states follow federal baselines with fewer additional restrictions.

The variation creates complexity for practices serving multiple Southern states. Collection strategies that work in one state may violate laws in neighboring states. Systematic review of requirements for each patient’s location is essential.

Midwestern States

Midwestern states have enacted selective protections. Some limit interest rates or require specific disclosures before collection begins. Others follow federal standards without significant additional restrictions.

Practices should verify applicable statutes of limitations, which vary across the region. Understanding time bars prevents improper collection on time-barred debt.

Western States

Western states lead in medical debt reform. Colorado prohibits medical debt credit reporting and has extensive patient protections. Nevada’s 60-day waiting period represents one of the strongest collection delay requirements nationally.

California provides strong homestead protections and limits wage garnishment. Washington and Oregon have enacted various consumer protections affecting medical debt collection.

States with Comprehensive Bans

Several states have enacted comprehensive medical debt protections. Rhode Island now prohibits credit reporting, bans wage garnishment, protects homes from liens, and caps interest rates. These comprehensive approaches provide models for other states considering reform.

The five states banning wage garnishment entirely—Delaware, New York, North Carolina, Pennsylvania, and Texas—eliminate one of the most powerful collection tools. Practices in these states must rely on other collection methods or accept that some debts will remain unpaid.

Multi-State Practice Compliance

Challenges of Multi-State Operations

Multi-state practice compliance requires tracking requirements across all jurisdictions where patients reside. A single practice may serve patients from dozens of states, each with unique collection laws. The administrative burden of monitoring and implementing varied requirements is substantial.

Interstate collection challenges multiply when patients move between states. Determining which state’s law applies to collection activities requires legal analysis. Generally, the patient’s state of residence governs, but exceptions exist.

Tracking State Requirements

Effective compliance requires systematic tracking of state medical debt laws. Practices should maintain current summaries of key requirements for all states where patients reside. Subscription to legal update services helps monitor changes.

The pace of change makes ongoing monitoring essential. Since 2021, eleven states have enacted new medical debt protections. More are considering similar legislation. What was compliant last year may violate current law.

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Jurisdictional Collection Rules

Jurisdictional collection rules determine where and how collection lawsuits proceed. Small claims courts in different jurisdictions have varying procedures, filing requirements, and limitations. Understanding these variations prevents procedural errors that derail collection efforts.

Some states require specific documentation before suit can be filed. Others mandate mediation or arbitration before litigation. Knowing these requirements prevents wasted effort and procedural dismissals.

Local Patient Protection Ordinances

Beyond state laws, local patient protection ordinances may impose additional requirements. Some cities and counties have enacted their own consumer protection measures affecting debt collection. Practices should verify whether local ordinances apply in patients’ communities.

Local requirements typically mirror state laws but may include stricter limits or additional disclosure requirements. Checking for applicable local ordinances before initiating collection protects against unexpected violations.

Regional Billing Requirements

Regional billing requirements may affect statement content, timing, and delivery. Some states require specific disclosures on patient statements. Others mandate plain language explanations of charges. Failure to include required information can delay collection or trigger penalties.

Practices should review Patient Balance Collection Laws by State templates for compliance with all applicable state requirements. Where requirements vary, statements may need customization based on patient location.

Legal Collection Actions and Limitations

Lawsuit Filing Requirements

Lawsuit filing requirements vary by jurisdiction. Some states require specific documentation to be filed with complaints. Others mandate pre-suit notice periods. Understanding these requirements prevents dismissal and ensures efficient litigation.

Pre-judgment remedies available to creditors also vary. Some states allow pre-judgment attachment of assets under limited circumstances. Others prohibit such remedies entirely. Knowing available options supports appropriate case evaluation.

Post-Judgment Collection Limits

Post-judgment collection limits determine what creditors can do after obtaining judgments. As discussed, wage garnishment is prohibited entirely in five states. Other states limit the percentage that can be garnished or exempt certain income sources.

Bank account seizure restrictions vary similarly. Some states protect certain accounts or amounts from seizure. Others allow judgment creditors to reach most accounts. Understanding these limits helps practices evaluate whether litigation is worthwhile.

Property Execution Exemptions

Property execution exemptions protect certain assets from seizure. Homestead exemptions protect primary residences up to specified values. Personal property exemptions cover household goods, tools of trade, and other essentials.

States set their own exemption amounts, which vary dramatically. Some provide generous protections; others offer minimal exemptions. Understanding applicable exemptions helps predict collection outcomes and identify cases where litigation is futile.

Debt Sale Prohibitions

Debt sale prohibitions limit providers’ ability to sell medical debt to third parties. Some states restrict or prohibit sale of medical debt, particularly debt that may be eligible for financial assistance. These restrictions aim to prevent aggressive collection by debt buyers.

Before selling debt, practices should verify whether state law permits sale and under what conditions. Some states require specific disclosures or waiting periods before sale.

Medical Creditor Obligations

Medical creditor obligations extend throughout the collection process. Providers must document efforts to determine financial assistance eligibility, maintain accurate records, and respond to patient disputes. Failure to meet these obligations can create independent liability.

The Commonwealth Fund found only six states have reporting requirements robust enough to identify noncompliance. However, all states expect reasonable collection practices. Documentation supporting compliance protects against challenges.

Patient Balance Collection Laws by State-Best Practices for Compliant Collections

Pre-Collection Verification

Before initiating collection, verify that:

• Debt is valid and accurately documented
• Patient received required notices
• Financial assistance screening was completed
• Applicable waiting periods have expired
• Statute of limitations has not run

This verification prevents collection of invalid debts and demonstrates good faith compliance with legal requirements.

Documentation Requirements

Maintain comprehensive documentation of:

• Original charges and payments
• All patient communications
• Financial assistance screening results
• Collection activity dates and methods
• Dispute resolution correspondence

Documentation supports compliance demonstrations and defends against patient claims.

Vendor Management

When using collection agencies:

• Verify agency licenses in all relevant states
• Contractually require compliance with all laws
• Monitor agency practices through regular reporting
• Investigate patient complaints promptly
• Maintain oversight of legal actions filed

Agencies acting on your behalf create liability for your practice. Active oversight is essential.

Patient Communication Strategies

Effective communication prevents many collection problems:

• Send clear, accurate statements promptly
• Respond to patient questions thoroughly
• Offer payment plan options proactively
• Screen for financial assistance regularly
• Document all patient contacts

Patients who understand their bills and have payment options are more likely to pay without collection intervention.

Regular Compliance Audits

Conduct regular audits of collection practices:

• Review state law changes quarterly
• Audit sample accounts for compliance
• Verify vendor practices meet requirements
• Document corrective actions taken
• Update policies and procedures

Audits identify problems before they create liability and demonstrate good faith compliance efforts.

Frequently Asked Questions
Patient Balance Collection Laws by State

Which states ban wage garnishment for medical debt?

Five states prohibit wage garnishment entirely for medical debt: Delaware, New York, North Carolina, Pennsylvania, and Texas. New Hampshire doesn’t ban garnishment but requires collectors to return to court for each paycheck, creating practical barriers. All other states allow some form of wage garnishment, though limits and exemptions vary significantly.

What states prohibit medical debt from appearing on credit reports?

Colorado, New York, and Rhode Island have enacted laws prohibiting credit reporting agencies from including medical debt in consumer reports. Other states are considering similar legislation. The CFPB has encouraged these efforts, noting that medical debt is less predictive of creditworthiness and prone to errors.

How long can providers pursue medical debt collection in each state?

Statutes of limitations for medical debt vary significantly by state, typically ranging from three to ten years. After the statute expires, patients can raise the expiration as a defense to collection lawsuits. Practices must know applicable statutes for each patient’s state of residence and cannot sue on time-barred debt.

What waiting periods apply before medical debt collection can begin?

Nevada requires 60 days’ written notice before taking any action to collect medical debt, a requirement upheld by the Ninth Circuit. Other states have similar waiting periods or require specific disclosures before collection begins. These waiting periods give patients time to verify debt or seek financial assistance.

How do state interest rate caps affect medical debt?

Several states limit interest that can accrue on medical debt. Rhode Island’s new law caps interest between 1.5% and 4% annually. Other states have various limits. Providers must verify applicable caps before adding interest to outstanding balances, as exceeding caps creates compliance exposure.

What financial assistance requirements apply to hospitals?

Twenty-one states require hospitals to provide financial assistance and set minimum standards exceeding federal requirements. All but three of these states extend requirements to for-profit hospitals. These policies must be publicized and accessible, and patients must be screened before accounts move to collection.

How can multi-state practices ensure collection compliance?

Multi-state practices should maintain current summaries of requirements for all states where patients reside, subscribe to legal update services, implement systematic financial assistance screening, verify vendor compliance with applicable laws, and conduct regular compliance audits. Investment in compliance infrastructure protects against liability while supporting appropriate collection.

Expert Insight

Understanding patient balance collection laws by state is essential for healthcare providers serving patients across multiple jurisdictions. The patchwork of state requirements creates compliance challenges that demand systematic attention and ongoing monitoring.

Medical debt collection laws continue evolving rapidly. Since 2021, eleven states have enacted new protections. Rhode Island’s 2025 laws represent some of the nation’s strongest restrictions. More states are considering similar measures.

For healthcare providers, medical practices, and revenue cycle managers, compliance requires:

• Tracking requirements across all states where patients reside
• Implementing systematic screening for financial assistance
• Documenting all collection activities thoroughly
• Verifying vendor compliance with applicable laws
• Auditing practices regularly to identify and correct problems

The trend toward stronger patient balance recovery statutes shows no sign of slowing. States increasingly recognize that medical debt differs fundamentally from other consumer debt and requires special protections. Practices that embrace these protections—screening patients for assistance, offering reasonable payment plans, and avoiding aggressive collection—will navigate the changing landscape successfully.

State medical debt laws will continue to diverge, creating ongoing compliance challenges. Practices serving multi-state patient populations need systematic approaches to tracking requirements, training staff, and monitoring compliance. Investment in compliance infrastructure protects against liability while supporting appropriate collection of legitimate debts.

At EZMedPro, we help providers navigate this complex landscape. Our revenue cycle solutions incorporate compliance with patient balance collection laws by state, ensuring our clients collect appropriately while respecting patient protections. We monitor regulatory changes continuously, updating practices as requirements evolve.

The future of medical debt collection will likely include continued state action and potential federal reform. Providers who build compliant, patient-centered collection practices today position themselves for success regardless of how regulations change tomorrow.

Trusted Industry Leader

Navigating patient balance collection laws by state requires expertise and constant vigilance. Contact EZMedPro today to discuss how our revenue cycle solutions ensure compliant collections across all fifty states. Let our experts help you collect appropriately while respecting patient protections and avoiding compliance pitfalls.