If you fail to pay a medical bill - the collection company can sue you. If you are sued - it can result in a judgment. A judgment can act as a judgment lien and can last for up to 20 years. You are allowed to exempt 125k of equity in your home through a homestead exemption. It is possible to foreclose on a judgment. However, I cannot tell from your post if there is a judgment - or if the creditor is telling you false information. It is not uncommon for some creditors to intentional mislead people by telling them inaccurate collection remedies - or using accurate terms - but, not . in the proper context.
Contact Northwest Justice Project and screen for counsel. http://nwjustice.org/get-legal-help
Probably not. The creditor has to sue you first and win and then it would have to do a judicial foreclosure which is a pain the butt for the creditor and is very rare. If somehow WA State DSHS is your creditor the state can get lien rights without a lawsuit, but DSHS usually just lets the lien sit there until the house is sold by you or your estate after your death and the bills gets paid as part of the sale's process. The info about the $125K exemption of sale's proceeds either from voluntary sale or foreclosure sale is correct, this is know as the "homestead exemption".