There are billions of dollars in unpaid medical debt held by millions of Americans. Indeed, it is such a big problem, the Consumer Financial Protection Bureau studied the issues to see if our current credit reporting scheme accurately and fairly accounts for it. Spoiler alert: it does not. But, as a result, some medical debt holders have received relief already.
Medical debt is a problem
The medical debt struggle is real for many people in New Jersey. Over 40% of Americans struggle with medical debt, according to the Kaiser Family Foundation. In fact, there is over $200 billion in outstanding medical debt. The CFPB found that half of that debt ($88 billion) is already reported to the three major credit report bureaus: TransUnion, Experian and Equifax.
What is the medical debt relief?
While debt forgiveness is in the news lately, the medical debt relief that many of us received was not forgiveness. Instead, TransUnion, Experian and Equifax changed the way medical debt is reported to consumer credit reports. Starting July 1, no reported medical debt can be less than one year, and once it is paid off or settled, it is removed. Then, next year, all medical debt less that $500 will disappear.
What does it mean?
During July, this all happened automatically. As such, if you check your credit report, you will notice that your score has gone up. And, you are not alone. Of those with medical debt, 23% will receive a benefit, and for those that had medical debt in years past, 22% will see relief. Of course, this does nothing to reduce the costs of medical care or medical bills, but it will provide relief to millions.
What if my medical debt does not qualify?
If all your medical debt is over $500, unpaid and over a year old, your credit report was not affected on July 1. This means that harassing phone calls will continue, and your credit score will continue to worsen.
Will this stop collection efforts?
Unfortunately, no. Even if your credit score jumps up because your unpaid medical debts are less than a year old, the debt holders can still come after you. This means the harassing calls will continue, and lawsuits could be filed.
Bankruptcy is still an option
For those struggling with unpaid medical debt, while these new policies may temporarily give you a higher credit score, they do not solve the underlying problem. For that, bankruptcy is a viable option.