If you are among the millions of Americans with medical debt on their credit reports, there is some good news coming your way. Starting July 1, 2022, the three major credit bureau agencies (TransUnion, Equifax, and Experian) will no longer report medical debt that was paid after it went to collections. Simultaneously, they will also increase the reporting time between a medical debt going to collection and appearing on your credit report from six months to a year.
This means that you have one full year to pay your medical debt that is placed in collection before a collection item is placed on your credit report. Even if you pay your debt off after it has been reported, the entry will be nevertheless be removed.
In 2023, there will be one more change: the three main credit reporting agencies will stop reporting medical debt that is less than $500. These changes will impact millions of American who have struggled with medical debt.
American Medical Debt
According to the Consumer Financial Protection Bureau (CFPB), there is approximately $88 million in medical debt on consumer credit reports. The reports further show that 58% of third party collection items on credit reports are for medical debt.
Entries for medical debt, just like any other debt entry on your credit report, can lower your credit score. However, it should be noted that the CFPB also reports that medical debt doesn’t necessarily indicate that you are a credit risk in the way other collection items do.
These upcoming changes are expected to remove tens of billions of dollars in medical debt from consumer reports. Although this won’t necessarily solve the entire credit problem impacting millions of Americans, the delay in reporting of medical collection items and other important changes can help with issues like access to credit, apartment rentals, and even car insurance rates. But it will not remove the debt.
New Protections for California Residents
California legislation has added to the recent changes to the medical debt safety net. Among other protections, the new legislation mandates hospitals in California to take certain steps before selling medical debt to a debt buyer.
The hospitals are also required to provide the patient with advance notice of the sale to a debt buyer. The notice must include pertinent information, including:
- Instructions for obtaining an itemized bill
- Information about the medical insurance or other coverage the hospital has on record, or a statement that it does not have that information
- An application for the hospital’s charity care or financial assistance program
Furthermore, hospitals are not allowed to sell patient medical debt to a debt buyer if the responsible party or patient is making a good faith attempt to qualify for charity care or financial assistance, or is attempting to negotiate a payment arrangement – unless the debt buyer agrees to meet the statute term requirements.
Although all these changes are designed to help those in debt, it will not provide everyone the financial relief they seek. Depending on your situation, filing for Chapter 7 bankruptcy may be a better option – especially since medical debt is 100% dischargeable.
Call an Experienced Central Valley Bankruptcy Attorney
If you are considering Chapter 7 bankruptcy, it is in your best interest to consult with an experienced bankruptcy attorney to help you learn your legal rights and options, especially with respect to Chapter 7 bankruptcy.
For more information or to schedule a complimentary consultation with Central Valley bankruptcy attorney Gurjit Srai, please call 209-323-5558, or complete our online form.