I owe a hospital bill of $1000 from back in march and it has gone to a collections agency. Now my problem is, my insurance company actually sent me the check to make the payment. They instructed me to put it into my checking account then send a personal check to the creditor. However when I put the check in my account I didn't realize I had a negative balance so part of the funds were retrieved by my bank. Now since then I sent a letter to the collections agency explaining the situation. I also sent a payment of $150 with the letter and informed them that I would continue to make monthly payments of at least $50 but I believed I would be able to send much more. Of course they left me a message on my voicemail saying "we" have a problem etc... But if I have agreed in writing to make payments can they still contact an attorney and garnish my paycheck ? I heard once before they can not refuse any payment no matter what the amount is, is that correct ?

Normaly they will accept payment, if in good faith you are trying to pay the debt, but you must make monthly payment on time.

If they refuse payment and return it to you they have dishonor the debt, and that a problem for them. By refusing payment the dishonor cancels the debt.

Dishonor of debt only applies under the agreed terms of the debt. If there is no agrement between both parties there eis no dishonor. If the collection agency acquired the debt under an outright transfer they have the same rights as the original debt owner which was probably payment in full.