Medical Debt

Medical Debt

A Proposed Federal Regulation Could Eliminate Nearly All Medical Debt from Credit Reports

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Americans carry more than $220 billion in medical debt, according to the Kaiser Family Foundation. Approximately 14 million people (6% of U.S. adults) owe more than $1,000 in medical bills, while 3 million people (1% of U.S. adults) owe more than $10,000.

How medical debt impacts your credit score has shifted in the past few years; however, a new proposed government regulation could remove medical debt completely from credit reports.

Medical debt can come from a variety of sources, including hospital visits, surgeries, doctor and dentist appointments, prescriptions, and emergency ambulance transportation.

Unpaid medical debt that is in collections can be reported to credit bureaus after one year. In April 2023, the three main credit bureaus — Experian, TransUnion and Equifax — stopped including medical debt under $500. This change eliminated nearly 70% of medical debt from credit reports, according to Equifax.

The Consumer Finance Protection Bureau (CFPB) has proposed a new regulation that would prevent nearly all medical debt from appearing on credit reports, no matter the amount.

Medical bills “have little to no predictive value when it comes to repaying other loans,” the CFPB said in a statement.

If enacted, the law would impact past-due payments from a medical provider and money owed to a collection agency.

According to the CFPB, the rule change would:

  • Remove exceptions that let lenders use information about medical debt to make determinations about someone’s creditworthiness.
  • Prohibit credit reporting agencies from including medical debt on credit reports sent to creditors if the creditor is prohibited from considering it.
  • Bar lenders from using medical devices like wheelchairs and prosthetic limbs as collateral for loans or from repossessing them if someone cannot repay the loan.

How Medical Debt is Handled in Bankruptcy

In bankruptcy, medical debt is treated the same as credit card debt. Medical bills are listed as general unsecured debt and can be easily wiped out in a Chapter 7 bankruptcy filing.  Making the decision to file for bankruptcy is never an easy one.

Fortunately, consumers have the option available to them to file for bankruptcy to escape this burden of medical debt. In a bankruptcy case, debts are classified into two categories: secured and unsecured, as well as priority and nonpriority debts. Secured debts are those that are backed by a form of collateral, while priority debts can be unsecured but receive special status, such as tax bills, student loans, and child support. Unsecured debts are those debts that are not secured by collateral and include personal loans, credit card debt, and medical debt.

In a bankruptcy case, unsecured debts are the ones that are discharged at the end of the case, while priority and secured debts are the focus of payment plans or payment in a Chapter 7 case after assets are liquidated. If a debt is discharged, this means the court has issued an order stating that the debt does not have to be paid.

Medical debt may also become part of the repayment plan issued as part of a Chapter 13 bankruptcy case. The bills may not end up paid in full, but the medical providers will receive at least some amount of payment, which helps the consumer maintain a relationship with their healthcare providers. Repayment plans normally last three to five years, ending with the consumer’s remaining debts, including medical debt, getting discharged.

Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney Timothy Kingcade knows how to help clients take full advantage of bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken, P.A. website at www.miamibankruptcy.com.

SOURCE: Can Medical Debt Affect Your Credit? (cnbc.com)

Medical Debt

Can a Bankruptcy Case Be Filed Over Medical Bills?

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The cost of healthcare has become a growing problem for many. One that has pushed patients to the brink of financial crisis. According to the Centers for Medicare and Medicaid Services, spending on healthcare in the U.S. has reached a record $4.1 trillion. The good news is bankruptcy can be used as an effective tool to eliminate medical bills, giving the consumer a fresh financial start.

According to figures from the 2021 U.S. Census, approximately one in every five households, or roughly 19 percent of all households, were not able to pay for medical care when it was needed. Many of these bills go unpaid and result in collections actions against the consumer. In fact, according to the Consumer Financial Protection Bureau (CFPB), in 2022, whenever debt collectors contacted consumers, medical debt was the main reason for this communication.

Medical Debt

Medical Credit Cards Drive Patient Debt and Inflate Costs of Health Care, according to CFPB Report

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The Biden administration has issued a word of caution to consumers about the growing concerns they have behind medical credit cards and other loans used to pay down medical bills. These concerns have been expressed in a new report published, which warns consumers that high interest rates on these cards can only increase the patient’s debt and eventually threaten their financial situation.

In the report, issued by the Consumer Financial Protection Bureau (CFPB), they reported that U.S. consumers paid $1 billion in deferred interest on medical credit cards and other types of medical financing between the years 2018 and 2020. The interest rates on these cards can be particularly high, which is why the CFPB found that medical credit card interest rates can inflate medical bills by approximately 25 percent (25%).

Medical Debt

Medical Debt May No Longer Affect Your Credit Score

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Relief may be on the way for consumers struggling with medical debt. As of July 1, 2022, the three largest credit bureaus, TransUnion, Equifax, and Experian, are removing cleared medical debts from consumers’ credit reports.

What this means is if the consumer has paid his or her medical bill in full, and that debt is still plaguing his or her credit report, this negative mark will now be removed. This announcement comes as part of a larger endeavor by the Biden administration to either decrease or eliminate medical debt as part of government lending determinations.

Medical Debt

Major Credit Reporting Agencies to Remove Majority of Medical Debt from Consumers’ Credit Reports

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Beginning in July 2022, the three major credit reporting agencies, Equifax, Experian, and TransUnion, announced they will remove approximately 70 percent of medical collection debt from their credit reports.

Specifically, paid medical collection debt will be the debt no longer included on consumer’s credit reports. The hope behind these efforts is to allow consumers more time to address their medical debt with their healthcare providers and insurance companies prior to the debt being reported.

Medical Debt

Laws in 10 States Provide Financial Assistance for Low-Income Patients, Help with Medical Debt

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Several states have recently enacted laws to help alleviate the burden of medical debt for individuals who are low-income and who are struggling to pay these bills. At least 10 states, including Maine, Maryland, New Mexico, and Connecticut have passed with provisions in them that heavily affect healthcare providers and third-party debt collection agencies. These provisions include requirements for hospitals to give financial assistance to patients with lower incomes and to limit the aggressive collection practices used to collect on these debts.

According to a recent study of credit reports from Transunion, medical debt is the largest source of consumer debt currently in collections. In fact, when compared to all other types of debt, medical bills surpass both credit card and utilities in terms of other debt being collected.

Credit Card Debt, Debt Relief, Medical Debt

Recent Study Reveals the Burden Debt Has on Mental Health

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Carrying any amount of debt can be stressful, but carrying substantial amounts of debt can be debilitating to a consumer’s emotional well-being.  Debt can cause anxiety and depression, and the longer a person carries it, the more likely he or she will feel physical and emotional effects from it. A recent study highlighted just how severe the effects of insurmountable debt can be.

The data reviewed comes from the 2021 BC Consumer Debt Study released by BC Licensed Insolvency Trustees Sands & Associates. They surveyed over 1,700 consumers throughout British Columbia who declared personal bankruptcy or legally consolidated a debt.

The survey noted two specific trends regarding consumer debt. The largest proportion, approximately 32 percent, of people who responded to the survey said that they had had $25,000 to $49,999 of debt, not including mortgages or car loans.

Four out of five surveyed said they found that the main causes of their debt were completely outside of their control. For example, 18 percent reported that their debt grew to the amount it was due to them needing to rely on credit to pay for essential costs of living that their income could not cover. Additionally, others reported that their debt was caused by other issues outside of their control, such as illness or health-related problems, the breakdown of a marriage or relationship, and job-related issues.

Of the consumers surveyed, more than 56 percent of them said that credit card debt was their largest source of debt before they entered formal proceedings to eliminate their debts. Payday loans were the main source of debt for approximately six percent of those polled.

Individuals surveyed reported that being in such deep debt negatively affected their well-being. In terms of emotional well-being, 77 percent said their mental health suffered. Four out of five individuals said they constantly worried about being in debt. Three in four surveyed said debt caused them anxiety.

Even more concerning, one in six individuals surveyed said that the stress of carrying large amounts of debt resulted in them contemplating or thinking of suicide.

Mental health was not the only thing affected by debt. Fifty-three percent said that their physical health likewise suffered.

One major issue occurs when the consumer is not truly aware of how much he or she actually owes, resulting in the individual’s finances spiraling out of control. The stress that results from this debt can be debilitating to the person’s mental well-being. Approximately 68 percent reported that they concluded that debt was a major problem when it became a source of major stress in their lives. Sixty percent (60%) said they realized debt was a problem when they could only make minimum payments, while fifty percent (50%) said they realized debt was a major problem when their balances never went down from month to month. Unfortunately, at that point, their debt had grown to a figure that they could not control, forcing them into either bankruptcy or other sources of debt relief.

For more information, the full study can be accessed here.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Medical Debt

CFPB Provides Details on No Surprise Act with Bulletin on Medical Debt Collection

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The Consumer Financial Protection Bureau (CFPB) released a bulletin regarding the recently passed No Surprise Act, specifically relating to both consumer reporting requirements and medical debt collection. This CFPB bulletin provides consumers with information on compliance requirements in a hope to clarify the new law for consumers and third-party debt collectors.

The No Surprise Act was enacted to protect consumers from being forced to pay for out-of-network through what is known as surprise billing. Surprise billing occurs when the customer receives a medical bill showing that a medical expense is much more than anticipated. Unfortunately, circumstances do exist where a consumer receives medical services from a hospital or other medical provider that he or she believes is in-network. However, the consumer soon receives an unwarranted surprise in the form of a bill showing that the doctor within that hospital is actually out-of-network.

In the bulletin, the CFPB warns debt collectors about how the Fair Debt Collection Practices Act (FDCPA) intersects with the No Surprise Act. Specifically, the CFPB expressed concerns regarding debt collection practices where the collector uses “false, deceptive or misleading representations” to get the consumer to pay on the debt. For example, a debt collector may feel compelled to make certain misrepresentations to the consumer that he or she must pay a debt that would otherwise fall under the No Surprise Act, when, in fact, the person is able to dispute the out-of-network charges made. Additionally, collecting an amount that far exceeds what is owed for medical care could also be considered a violation of the FDCPA.

The bulletin also expressed concerns regarding consumer reporting agencies (CRAs) publishing information regarding any unpaid medical debts that would otherwise fall under the provisions of the No Surprise Act. Under the Fair Credit Reporting Act (FCRA), CRAs are required to ensure that the information provided is accurate. CRAs and furnishers of consumer credit reporting information must establish and abide by reasonable procedures to ensure all information is accurate, and if there is any possibility that information published is not accurate, the CRA and furnisher must conduct a reasonable and timely investigation. Given that the No Surprise Act deals with situations where consumers may be told they owe a large amount of debt on a medical expense that would otherwise be covered, ensuring that CRAs are being diligent and careful when reporting this information is important.

Given the implications involved, it is important that both sides know what steps need to be taken to reduce the risk for liability in dealing with these debts. Additional guidance and information is anticipated as both consumers and debt collectors navigate the provisions of this new law.

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Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken, P.A. website at www.miamibankruptcy.com.

Medical Debt

New Law Will Protect Patients from Surprise Medical Bills

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Medical debt is the single largest cause of bankruptcy in America, according to the National Consumer Law Center (NCLC). Even if a person has medical insurance, most consumers have high deductible plans which require them to pay thousands of dollars upfront before their insurance will cover their medical expenses.

This fact could be why approximately 18 percent of all American consumers have some type of medical debt that is currently in collections, according to a recent study by the Journal of the American Medical Association. Between the years 2009 and 2020, unpaid medical bills were the largest source of debt being serviced by third-party debt collection agencies.

One of the biggest reasons for these debts being in collection involves a practice known as surprise billing. Surprise billing occurs when the customer receives a medical bill showing that a medical expense is significantly more than anticipated. The last thing a consumer wants to experience is an unpleasant surprise in the mail in the form of a bill showing that a hospital that he or she thought was in-network was, in fact, not in the person’s insurance network.  The U.S. Department of Health and Human Services reports that millions of American consumers have experienced surprise medical billing.

Often, even if a consumer believes that he or she is being seen at an in-network hospital, many times the doctors at that hospital are not in-network. They may be working at the hospital on a contract basis, being employed by a staffing firm and not the hospital itself. Once the individual is healthy and out of the hospital, he or she may soon discover that the expenses incurred during that stay were not covered by his or her insurance. This practice has become more common as private equity firms invest in the healthcare industry and look for methods to increase billing charges.

Consumers will find themselves protected from this billing practice in the near future, as of January 1, 2022, under the new “No Surprise Act.”

The No Surprises Act protects people covered under group and individual health plans from receiving surprise medical bills when they receive most emergency services, non-emergency services from out-of-network providers at in-network facilities, and services from out-of-network air ambulance service providers. It also establishes an independent dispute resolution process for payment disputes between plans and providers, and provides new dispute resolution opportunities for uninsured and self-pay individuals when they receive a medical bill that is substantially greater than the good faith estimate they get from the provider.

TIt is expected that the No Surprise Act will reduce overall healthcare costs, ensuring that consumers are paying a reasonable market rate for any medical services received.

Please click here to read more.

Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken, P.A. website at www.miamibankruptcy.com.

Medical Debt

Medical Debt Is Different: Know How To Deal With It

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It only takes one major medical emergency to set a person back thousands of dollars, even with adequate health insurance coverage. This is why medical debt is one of the largest categories of unsecured debt discharged in bankruptcy.

Many consumers resort to solutions such as paying medical expenses with credit cards or taking out personal loans to pay them off, but many times, these solutions only put them in more financial distress.