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The State Has Halted Debt Collections — But Not Collection Notices

Medical debt is the most common reason for collection calls, a federal study found.
Getty Images
Medical debt is the most common reason for collection calls, a federal study found.

People who owe money to the Kentucky Department of Revenue may still be receiving collection notices, even though Gov. Andy Beshear issued a directive to halt wage garnishments, bank levies and other enforced collection measures for the duration of the coronavirus epidemic.

Jill Midkiff, a spokesperson for the Department of Revenue, said collections have stopped. But the agency was required by law to send the notices, and it was unable to stop the letters from being sent automatically due to system limitations, she said. 

People may also still receive calls from the department notifying them of debts as they can still make payments. But the department will put a hold on collection if the individual is under financial strain due to the pandemic. 

“Either way,” Midkiff said in an email, “no enforced collection action will occur during this emergency.”

But the threat of collection still weighs heavy and causes confusion for people struggling. Still others may continue to have their wages garnished unless their employers take action to cancel the garnishment.

A portion of Trisha Grabert’s paycheck from Magna Seating was garnished on April 3, more than two weeks after Beshear ordered garnishment stopped. She says the debt stems from a tax issue she’s contested.

Midkiff said back in March that the department was working on releasing wage garnishments but that the volume of such cases — nearly 15,000 — made it difficult to do in a timely manner.

Grabert called the revenue department on April 13. The department told Grabert that employers were instructed to release any wage garnishments. The department told Gabert it could fax a copy of the release to her employer.

But the April 3 paycheck turned out to be Grabert’s last before Magna Seating, which makes seats for Ford’s Kentucky plant, laid her off. Grabert says if the levy had actually been placed on hold March 17, as it was supposed to, she would have an extra $200 to help weather the pandemic.

Beshear put Kentucky’s enforced debt collection on hold on March 17, the same day KyCIR published a report that showed Kentucky levied the highest interest and fees of any state in the country when it collected medical debt for UK HealthCare.

“A whole lot of things that seemed pretty important a couple weeks ago are just not going to be as important going forward,” Beshear said at a press conference at the time. “I don’t want to be garnishing wages during this period of time.”

Betsy Davis Stone, a health care law fellow at the Kentucky Equal Justice Center, said that pausing collection efforts is the right move during the coronavirus crisis. “But we also hope that the Department of Revenue will continue doing the right thing once this crisis is behind us,” Davis Stone said. “The Department of Revenue should have fair and responsible collection procedures, crisis or not."

For Randall Roach, state debt is the latest setback in a two-year string of bad luck.

“2019, 2020, are two years I’d just as soon have skipped,” Roach, a 46-year-old Marine Corps veteran, said.

Roach’s misfortune began in February of 2019 when two bullets ricocheted into his abdomen in a fluke accident at a shooting range.

He was taken to the nearest hospital in Barbourville, and then sent to UK Chandler Hospital for surgery. They couldn’t remove all of the bullet fragments without causing more harm, and he’s needed two follow up surgeries since to deal with complications from the procedure.

Roach was uninsured, and he said UK Chandler told him he qualified for charity care. He may receive bills, but he could disregard them, the hospital officials said. 

But last month, Roach got a letter from the Kentucky Department of Revenue saying he owed more than $58,000 to the UK healthcare system. The letter also informed him the department withheld Roach’s $653 state tax refund on March 16 — the day before the governor put such collection methods on hold.

Jay Blanton, a spokesperson for UK Healthcare said in an email  they can’t comment on individual cases to protect the privacy of patients. Blanton noted in an email, however, that the Department of Revenue was not pursuing debts at this time and that UK Healthcare makes multiple attempts to contact a patient before bills are referred to the department for collection.

In addition to the UK HealthCare bill, Roach now owes $14,553 in collection fees and $803 in interest to the Kentucky revenue department. 

The Department of Revenue told KyCIR in a statement that it will not be acting on letters sent after March 17. But Roach didn’t know that when he received a certified letter this month, informing him if he didn’t pay by May 7 the state may seize his property, garnish wages or levy his bank account to pay for the debt. 

The threat of lost wages hit him hard.

“Once I got those two letters, needless to say I was absolutely floored and I’ve been a nervous wreck ever since,” Roach said. “I’ve never had a letter threatening anything like that before in my life.”

Three weeks ago, Roach started a new job working for a contractor with the Department of Veterans Affairs. It’s a good, well paying job at a time that those are hard to come by. Roach said it requires a security clearance.

On Tuesday, a government investigator told Roach that such a large debt would probably make him ineligible for a clearance. He’ll find out when the government’s background investigation is complete, a process that usually takes months, if the debt will cost him this new job. 

Contact Jared Bennett at jbennett@kycir.org.

Jared Bennett is an investigative reporter and deputy editor for LPM. Email Jared at jbennett@lpm.org.