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Congress to consider legislation limiting the credit consequences of medical debt

When a medical crisis suddenly arises -- cancer diagnosis, heart attack, accident injuries, etc. -- the primary objective of the patient and their loved ones is understandably to secure the necessary treatment as soon as possible -- without consideration of the costs incurred.

The unfortunate reality, however, is that even though the ensuing need to determine what health insurance will cover and how much the patient owes will take time to sort out, medical providers are often unwilling to wait. Indeed, they will begin sending bills to the patient as soon as possible and in the event there is any delay in remitting payment -- often because the patient is still waiting for word from the insurance company --  the matter will be forwarded to a debt collection company.

This is significant, of course, as not only will the patient have to cope with debt collectors, but they will also see the matter added to their credit report as a negative mark.

This means their credit score will take a hit, such that they are either denied credit or forced to pay higher interest rates for years -- despite the fact that they ultimately pay off their debt or settle it with the debt collector.

If you have a hard time believing all this, consider that statistics from the Consumer Financial Protection Bureau reveal that more than 43 million Americans currently have past due medical debt on their credit reports and that for 15 million Americans this is the only type of negative mark on their credit report.

In recognition of this systemic unfairness, U.S. Senators Bob Menendez (D-NJ) and Jeff Merkley (D-OR) have introduced the Medical Debt Relief Act, which, if enacted, would accomplish the following:

  • Forbid credit reporting agencies from considering either paid-off or settled medical debt when assessing credit worthiness, irrespective of whether the outstanding liability was resolved by the consumer or the insurance company
  • Forbid credit reporting agencies from considering outstanding medical debt until 180 days have passed since it officially became delinquent, meaning consumers would have more time to sort things out with their insurance company

"Responsible people should not be denied credit or forced to shell out more money in interest payments just because they got sick or injured," said Menendez in support of the legislation."That’s not fair. And we need to fix it.”

Stay tuned for updates on the progress of this legislation.

In the meantime, consider speaking with an experienced legal professional about your options in the event medical debt -- or any other type of debt -- has become insurmountable despite your best efforts. 

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