Can a hospital apply my refund to an old debt without my consent?

Full question:

My local hospital over- charged me by $100 for the co-pay on a recent out-patient test I had performed at their facility. When I received my insurance claim report indicating the over-charge, I phoned the hospital and they admitted they accidentally over-charged me and would refund the $100 to me as long as I didn't owe them money on any other account in my name. When the refund never arrived, I phoned the hospital again and they said they applied the refund to an unpaid debt I had from 1993 which they showed as 'bad-debt' though I have no recollection of ever receiving a bill for that debt. Is the hosptial within its rights to use the refund owed me in this manner and does their action reset the Statute of Limitations even though payment was made without my approval?

• Category: Contracts
• Date: 04/07/2025
• State: Alabama

Answer:

The answer depends on whether the 1993 charge is valid. You can request a statement to validate this charge. A "charge-off" means the creditor has written off the account balance as a "bad debt," typically after six months of non-payment. However, you still owe the money; the creditor just no longer lists it as an asset. If the bad debt is valid, the hospital may have the right to apply your refund to it, depending on the contracts involved, which likely favor the provider's right to collect payment. The statute of limitations for collecting debts in Alabama is three years for open accounts and six years for written contracts. If you agreed to have the refund applied to the past debt, this may affect your ability to invoke the statute of limitations. If you want to resolve this dispute legally, consider reviewing contract law and breach of contract actions.

Contracts are legally enforceable agreements that create obligations. An oral contract is made with spoken words and may be harder to prove than a written contract. Breach of contract occurs when one party fails to fulfill their obligations, causing harm to the other party. Remedies for breach include money damages, restitution, rescission, reformation, and specific performance. Restitution aims to restore the injured party to their prior position, while rescission ends the contractual duties of both parties. Specific performance compels a party to fulfill their contract duties when monetary damages are insufficient.

For more information on Alabama statutes, note that actions to recover money due by open account must be commenced within three years (Ala. Code § 6-2-37), while actions for written contracts must be initiated within six years (Ala. Code § 6-2-34).