For those struggling with medical debt, it may feel like bankruptcy is around the corner. Bankruptcy can help with medical debt, but some new rules that went into place in July may make bankruptcy a less appealing option for some.
The new policies
Starting July 1, Equifax, Experian and TransUnion, the largest credit bureaus in the United States, changed how they handled medical debt. First, if you settled or paid off debt, those debts will be erased from your credit report. Second, if any of that reported debt is less than a year old, it will be taken off your credit report. Third, next year, all debts less than $500 will similarly be stricken from credit reports.
What do I need to do?
According to Equifax, Experian and TransUnion, nothing. However, these credit bureaus are not known for their consumer friendliness and stewardship. As such, if you have medical debt, check your report. If there are still items there that have not been updated, dispute them. They should disappear after 30 to 60 days.
How does this affect medical debt bankruptcies?
To be clear, these policy changes are just that, internal policy changes to how the credit agencies operate consumer credit reports. These changes are not law, and they do not affect any right of medical debt holders. They can (and likely, will) still sue patients that have not paid their bills. But, the delayed reporting requirement does give these patients much more time and dispute their bills without it affecting their credit reports. It also incentives medical providers to work out payment and settlement terms, which can avoid bankruptcy.
Nonetheless, for those facing mountains of unpaid and unsettled medical debt in New York, even if it has not yet hit your credit report, bankruptcy may be a viable option. This is because it can instantly stop any pending lawsuits and collection attempts, and depending on the situation may completely eliminate those debts at the end of the bankruptcy process.