Medical bills and Collection Settlements

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    I have a collection account that the collection agency has agreed to settle for 50% of the amount. I have received a settlement letter and confirmation that my payment settles the debt. Will this be a problem for NACA?

    Also do unpaid medical collections need to be paid? And if I settle with the creditor for less than the amount owed, is this a problem?


    In short, none of that is a problem. If you settle a collection account, or put that account into a payment plan, it is usually good on NACA’s end. You will definitely want to hold onto those settlement letters and confirmations that the debt was paid, and you will likely have to write a Letter of Explanation for it, but other than that, it should be fine.

    As for the medical debt, I would pay it off if you are able, however, it does say in the NACA workbook that NACA will not hold medical debt against you. So therefore, you might just need a Letter of Explanation for that, and that should suffice. If you settle for less than is owed, it is not an issue. Between my wife and I, we had a bunch of accounts where we had settlements, as it was in our action plan to take care of these, and we did.

    But as long as you’re taking care of these, can prove they are paid off, and write Letters of Explanation explaining what happened, you shouldn’t have any issues! As always, check with your MC (if you have one) to confirm all of this.


    I guess I was/am a bit confused because I see on the forum that everybody says accounts need to be paid in full.


    Accounts do need to be paid in full unless the last activity is over 2 years old. NACA accepts a payment plan because that is an agreement the account will be paid in full. A settlement is simply a bargain and I would take it.


    @nelsont so then will the settlement be an issue?


    No. As long as the collections are old and the recent ones have at least a payment plan you are good to go.


    The one that was settled was about a year old and they offered to settle for 50% so I took it. I dont understand why NACA cares if it was less than 2 years. It the account is considered settled and proof is sent, I dont understand the problem


    By settled do you mean you only had to pay 50% and they considered the debt resolved? Did you pay this 50%?

    The reason they care is because having accounts in collections is indicative of poor spending habits that can potentially lead to missing mortgage payments and while naca does’t care if you have bad credit they do want to see that you have changed your ways and have a year or 2 of demonstrated good spending and saving habits before you qualify.

    The biggest issue is that underwriters will not connect dots so your credit report can potentially have a bill in collections marked as paid but also owing $500. Even though it says paid it still may say you owe because the settlement details don’t always make their way to the credit bureaus.

    But to your point. As long as you can prove the recent accounts were paid or are in a payment plan you have nothing to worry about.


    Yeah they either have to be paid in full or in a payment program. This would likely be the same with any other lender, banks probably won’t give you a mortgage if you have a bunch of stuff in collections.

    It sounds like everything you have done is fine. Just provide proof that the settlement occurred and you paid/are paying it and write a Letter of Explanation and you should be all set.


    Yep. Already paid the 50%


    Then you’re fine. Just provide the documentation to prove it. You will be qualified shortly.


    So, today I am a bit irritated. I just received a medical collections letter in the mail from 2014. In the letter it states

    “The law limits how long you can be sued on a debt. Because of the age of your debt. The creditor CANNOT sue you for it. In many circumstances you can renew the debt and start the time period for the filing of a lawsuit against you if you take specific action such as making a written promise to pay. You should determine the effect of any actions you take with respect to this debt”

    This debt in particular was in an action that I had with NACA from 2016. But I decided I was not ready and put everything on pause and waited until this year to go through the program. I use to be able to see this item on my action plan on my webfile, however with the recent change to the site, i can no longer view it. Will my MC be able to see this item on there to determine that it is indeed over 2 years old? I dont even know why they are coming out of the woodworks and trying to collect on something so old that I can’t be sued for.

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