In many states including Texas, anytime you are in an accident and are treated at the emergency room the treating hospital has the right to file a statutory hospital lien asserting a right to be paid for their outstanding bills. It is not uncommon for the injured party to receive a notice from a law firm shortly thereafter telling them that the hospital is asserting a lien against any third-party liability claim you own. If you are like most people, a notice letter from a law firm is concerning. This blog is here to help you better understand what the letter and the hospital lien really mean to you.
How does a hospital lien affect my personal injury case?
A hospital lien is a statutory tool that hospitals use to give notice to all potentially interested parties that they have provided you with medical care and have an interest in any money you recover to pay for those expenses. If “perfected” correctly, it creates a lien against your claim for personal injury damages that you assert against any other party. This is a type of statutory subrogation. The way it is typically perfected is by the hospital filing a qualifying lien notice in the county where the accident happened or where the services were rendered.
Once a hospital lien has been perfected, all parties, including their insurers and lawyers, are on “notice” of the lien. Failure to honor the lien by ensuring it is paid off before transferring money to the injured victim results in the hospital having a right to sue the offending party directly. So the insurance adjuster and the lawyers can become personally liable if they transfer settlement proceeds after the lien notice was filed, without paying the lien holder off first. The lien will remain on file until it is paid off and released—regardless of whether you bring a personal injury claim to recover the money or not.
How does a hospital lien affect my credit?
If you have a hospital lien on file, the lien itself does not affect your credit. Hospital liens are purely enforceable against your personal injury claim under which the medical care subject to the lien arose. However, the underlying debt to the hospital may also be filed against your credit as an outstanding debt if you and/or your personal injury attorney fail to make arrangements to pay the lien. So, as long as you make arrangements to pay the debt so it does not go to collections, the hospital lien itself will not mess up your credit score.
How does a hospital lien affect my ability to sell my house?
Your ability to sell your house is not directly hampered by a hospital lien. Now some lenders may get cold feet when they see it on file because they know you have an unpaid debt and they may be concerned that the hospital will initiate collection proceedings. So if you are buying a home, odds are you may have more issues with a hospital lien than if you are selling your home. But, legally, the lien does not preclude buying or selling a home.
How does a hospital lien affect my bankruptcy case?
If you are in bankruptcy, typically creditors who have liens have a priority interest in your estate. The reason for this is that the lien attaches to certain tangible assets. However, a hospital lien does not attach to any physical personal or real property. It attaches to money you have not yet collected. If your bankruptcy attorney decides to pursue a recovery in your personal injury case (which they can take over when you file bankruptcy), then that money will go to the hospital. Otherwise, no other assets are affected by the lien so it does not get priority standing. The related bills will go through the bankruptcy proceedings and the lien does not prohibit the Court from discharging the debt in whole or in part.
Conclusion
A hospital lien is a statutory tool created to ensure that the hospital gets paid first for related care provided out of any settlement or judgment proceeds related to a personal injury case. The lien does not affect any property other than a personal injury recovery. So while the underlying debt may affect your credit or other rights, the lien itself does not.
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