Can Hospital Bills Garnish Your Tax Refund?


Garnishment is often a last resort employed by creditors to recover unpaid debt. Hospitals, too, sometimes apply this method (which some debtors find outrageous) after running out of amicable options. They sue the debtor to court and obtain a writ of garnishment to garnish the individual’s wage or bank account. Since hospitals are capable of garnishing defaulter’s bank account or wages, you may be keen to know if hospitals can garnish your tax refund as well.

It is illegal for a hospital to garnish your tax refund. Only the federal government can garnish your tax refund for unpaid debts like federal student loans, child support, and so on. However, if your tax refund is deposited directly into your account, it can be garnished by a hospital.

The cost of medical care is on the increase with no sign of slowing down. With the average insured overnight hospital stay costing $11,700, people, especially the average American, struggle to settle these bills without racking up debt. And as you already know, hospitals need money to run, so they will go after defaulters to recover their money. One tactic they use is wage or bank account garnishment, which I usually deem debtor’s bane. If a hospital bill can have your wage or bank account garnished, can it do the same to your tax refund? Read on to find out.

How Long Does It Take to Garnish a Bank Account?

Can Hospital Bills Garnish Your Tax Refund?

Having health insurance doesn’t completely shield you from medical bills, given that you are still required to pay a portion of the overall medical bill. If your insurer settles a part of your medical bill and you are unable to settle the rest, what would happen? Will you be forgiven, probably because you are in a difficult financial situation? Or will the hospital choose to ignore the rest, maybe because your insurer has covered most of the bill?

What Happens if I Cannot Pay Hospital Bills?

If you cannot settle your hospital bills, the medical provider will do one of the following things after a grace period which differs per hospital:

  • Sell your debt to a collection agency
  • File a lawsuit
  • Charge you late fees

You must note that, like every other debt, an unpaid medical bill can wreak havoc on your credit score.

Note: You cannot go to jail for unpaid medical bills.

You’ll Be Charged Late Fees:

When you fail to pay your medical bills at the right time, you aren’t doing yourself any favor. You are only making the bill more expensive. You must note that when you miss the due date, you become subject to late fees or interests. If a late fee is added to your existing medical bill, it can make your bill bigger than it was initially.

Depending on the state you reside in, you might escape paying penalty fees. In some states, medical providers aren’t allowed to charge these fees. Thus, ensure you do your research to know where you stand.

Below are some of the states that ban medical providers from charging late fees:

  • Illinois
  • Minnesota
  • California
  • New York

Sell Your Debt to a Collection Agency:

If you fail to comply with your healthcare provider’s demand regarding paying your bills, they may be forced to sell your debt to a collection agency. A debt collection agency is often called upon if you are three months past the payment due date.

And unlike medical providers, debtor collectors boast of an array of tricks and tactics designed to compel you to pay what you owe. And yes, some of them won’t go easy on you. Don’t forget, debt collectors are designed to collect debts, and they know how to do their job well.

They Can File a Lawsuit:

The longer you decide to wait, the worse your case becomes. Thus, don’t be shocked if a debt collection agency or the medical provider decides to take legal action against you. Of course, they can, and they will if you compel them to do so.

After suing you for an unpaid medical bill, the court will decide the appropriate punishment. One of the most common punishments is wage or bank account garnishment. If your wage is garnished, your employer will have to send a portion of your salary to the medical provider as payment for your debt. If your bank account is garnished, the medical provider will be able to withdraw money from your bank.

Can a Hospital Refuse to Treat a Patient Without Insurance?

Can a Hospital Touch Your Taxes?

A hospital can garnish your wage or bank account. But can a hospital take your state refund? I have had numerous cases of clients who ask me this question. Of course, they allowed medical bills and got frequent wage garnishment threats from their respective medical provider.

That said, can your state refund be taken by a hospital?

Your tax refund cannot be garnished by a credit company, a mortgage lender, or even a hospital. The federal government is the only party or entity with the power to garnish your tax return. They usually do that when you owe federal student debt, child support, federal or state taxes, and so on.

However, if your tax return is sent as a direct payment to your bank account, and the medical provider ends up garnishing the account, your tax refund may be used to pay your debt. The best way to avoid such a scenario is by filing an exemption claim in court. An exemption claim will exempt your tax refund, including SSI, from garnishment.

How Does a Creditor Find Your Bank Account?

Who Can Garnish Your Tax Refund?

A creditor can take legal action against you to garnish your wages or bank account. In the same vein, a medical provider can also take legal action against you in a bid to garnish your wages or bank account. But, these entities aren’t allowed to garnish your tax refund. That said, if a creditor and a medical provider aren’t allowed to garnish your tax refund, who has the power to do so?

Only the federal government has the authority to garnish your tax refund, and they usually do this when you default on a federal student loan, child support, federal income tax, unemployment compensation, and spousal support.

The rate at which questions like “Can the IRS take my federal refund for hospital bills” flood major Q and A sites like Quora is overwhelming. It is essential the individuals asking this question know that such a move is impossible. Only the Federal Government has such right to take your refund.

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