Sued by Medicredit? How to Respond and Settle Your Debt

Medicredit didn't lend you money. They bought your old debt for pennies on the dollar, and now they want you to pay the full balance. That's their business model. They purchase charged-off accounts from hospitals and medical providers, then chase you with phone calls, letters, and lawsuits.

If they've sued you, you have about 21 days to respond. Miss that deadline and they get a default judgment. That means wage garnishment, frozen bank accounts, and a ruined credit report. But if you respond correctly, you can force them to prove they own your debt and often settle for far less than they're demanding.

Who Is Medicredit and Why Are They Calling You?

Medicredit Corporation operates as a debt buyer under The Outsource Group. They specialize in medical debt collections. When hospitals and medical providers write off unpaid bills, they sell those accounts to companies like Medicredit for 3 to 8 cents on the dollar. Medicredit then attempts to collect the full amount.

You might owe $5,000 on your account, but Medicredit probably paid $250 for it. That gap is your leverage. They'd rather settle for $2,000 than spend money fighting you in court over a debt they barely paid for.

Medicredit typically starts with phone calls and letters. If you ignore those, they escalate to lawsuits. They file thousands of collection suits every year, mostly in small claims court where they bet you won't show up. About 70% of debt collection defendants never respond, giving collectors easy wins.

Your Rights Under the Fair Debt Collection Practices Act

The FDCPA limits what debt collectors can do. Medicredit breaks these rules constantly because most people don't know their rights. Here's what they cannot do:

• Call before 8 a.m. Or after 9 p.m. In your time zone
• Contact you at work after you tell them your employer prohibits such calls
• Threaten you with arrest or legal action they cannot or will not take
• Discuss your debt with anyone except you, your spouse, or your attorney
• Use profane or abusive language
• Falsely claim they can immediately remove negative marks from your credit report

Document every violation. Record calls if your state allows one-party consent. Save voicemails and letters. Each violation gives you grounds to sue them for up to $1,000 plus attorney fees. Even if you owe the debt, FDCPA violations are separate claims you can pursue.

What to Do When You Get a Debt Collection Lawsuit

You receive a summons and complaint in the mail or from a process server. The complaint lists Medicredit as the plaintiff and you as the defendant. It claims you owe a specific amount, usually with interest and court costs tacked on.

You have a deadline printed on the summons. This is typically 21 to 30 days depending on your state. Mark that date on your calendar. Miss it and you lose automatically.

File an Answer to the Complaint

Your Answer is a legal document that responds to each claim in the complaint. You don't need a lawyer to file one, though having one helps. The court clerk can provide the forms. You must serve a copy on Medicredit's attorney and file the original with the court before your deadline.

In your Answer, deny or admit each numbered paragraph. For most debt collection cases, your Answer should:

• Deny you owe the amount claimed
• Deny Medicredit owns the debt
• Raise affirmative defenses like statute of limitations
• Demand they prove their case with documents

This forces Medicredit to produce evidence. They must show they own your debt with a valid chain of title, that the amount is correct, and that the statute of limitations hasn't expired. Many debt buyers cannot meet this burden.

If you need help drafting your Answer, use our bankruptcy screener to evaluate whether responding to the lawsuit or filing bankruptcy makes more sense for your situation.

Raise the Statute of Limitations

Every state sets a time limit for filing debt collection lawsuits. This ranges from 3 to 10 years depending on your state and the type of debt. Medical debt is usually subject to the statute for written contracts.

If Medicredit sued you after the statute expired, the debt is "time-barred." You must raise this as an affirmative defense in your Answer. The judge won't do it for you. If you prove the statute ran out, the case gets dismissed.

Check when you last made a payment or acknowledged the debt in writing. That date usually starts the clock. Medicredit knows which debts are time-barred, but they sue anyway hoping you won't respond.

How to Negotiate a Settlement With Medicredit

Once you file your Answer, Medicredit's attorney will likely contact you about settling. They do not want to go to trial. Trials cost money, and they might lose. Settlement is their preferred outcome.

Start Low

Offer 25% of the claimed amount. They will counter higher. Your goal is to settle between 30% and 50% of the balance. Remember, they bought this debt for pennies. Anything above their purchase price is profit.

Get the agreement in writing before you pay. The settlement letter must state:

• The exact amount you will pay
• That this payment settles the debt in full
• That they will not pursue the remaining balance
• That they will dismiss the lawsuit with prejudice
• That they will report the debt as "paid in full" or "settled" to credit bureaus

Do not send money until you have this letter signed by Medicredit's attorney. Verbal promises mean nothing.

Payment Terms

If you cannot pay the settlement in one lump sum, negotiate a payment plan. Get this in writing too. Make sure the agreement states they will not pursue judgment while you make payments, and that the lawsuit will be dismissed once you complete the plan.

Never give Medicredit direct access to your bank account. Pay with money orders or cashier's checks so you have proof of payment.

What Happens If You Ignore the Lawsuit

Medicredit gets a default judgment. The court sides with them because you didn't show up to defend yourself. Now they have a court order saying you owe the money.

With a judgment, Medicredit can:

• Garnish up to 25% of your wages
• Freeze and seize money from your bank accounts
• Place liens on your property
• Renew the judgment for 10 to 20 years in most states

Some income is protected. Social Security, disability, and veterans benefits cannot be garnished for consumer debts. But Medicredit will try anyway, freezing your account until you prove the funds are exempt.

Default judgments can sometimes be vacated if you act quickly. You must file a motion showing good cause for why you didn't respond, usually within 30 to 60 days of the judgment. The court may give you another chance to defend yourself.

When Bankruptcy Makes More Sense

If Medicredit is one of several collection lawsuits you're facing, or if your total debt exceeds 40% of your annual income, filing for bankruptcy might be the better move.

Chapter 7 bankruptcy wipes out medical debt entirely. Once you file, Medicredit must immediately stop all collection activity, including their lawsuit. The automatic stay prohibits them from calling, suing, or garnishing your wages.

Chapter 7 costs about $300 in filing fees plus attorney fees, but you eliminate all unsecured debts in three to four months. If you qualify based on income, this is far cheaper than settling multiple collection accounts.

Chapter 13 bankruptcy stops lawsuits and sets up a payment plan based on what you can afford. You pay part of your debts over three to five years, and the rest is discharged. Medicredit cannot refuse or demand more.

How to Remove Medicredit From Your Credit Report

Medicredit reports your account to Experian, Equifax, and TransUnion. This tanks your credit score by 100 points or more. The collection stays on your report for seven years from the date of your first missed payment.

If you settle the debt, Medicredit will not remove the collection. They will update it to "settled" or "paid." This is better than "unpaid," but it still hurts your score.

Your best shot at removal is a "pay for delete" agreement. Before you settle, offer to pay the full settlement amount if they agree to delete the collection from all three credit bureaus. Get this in writing. Not all collectors agree to this, but it's worth asking.

If Medicredit reports inaccurate information, dispute it with the credit bureaus. They must investigate within 30 days. If Medicredit cannot verify the debt, the bureaus must remove it.

Common Medicredit Tactics and How to Counter Them

Medicredit collectors use scripts designed to pressure you into paying immediately. Here's what to expect and how to respond.

"Pay today and we'll remove this from your credit report immediately"

They cannot do this. Credit reporting is governed by federal law. Accurate information stays on your report for seven years. Only inaccurate information can be removed immediately.

Tell them: "Put that in writing. I want a signed agreement stating you will delete this tradeline from all three credit bureaus within 30 days of payment."

They will backtrack or refuse. Do not pay without written proof.

"We're filing a lawsuit tomorrow unless you pay now"

This is a scare tactic. If they haven't filed already, one more day makes no difference. Even if they do file, you have time to respond.

Do not panic and agree to a payment plan over the phone. Say: "Send me written validation of this debt and your settlement offer. I will review it and respond in writing."

"We need your bank account information to set up a payment plan"

Never give a debt collector your bank account or routing number. They can use this to pull unauthorized payments. Some collectors have taken the full amount after agreeing to a payment plan for less.

Pay with money orders or cashier's checks only. If they refuse, that's a red flag.

The Bottom Line

Medicredit bought your debt cheap and has limited ammunition. Respond to the lawsuit, demand proof, and negotiate hard. You can settle for far less than they're claiming, and if they cannot prove they own the debt or sued you outside the statute of limitations, you might owe nothing at all.