Medical Debt

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

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

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

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%).

Credit Card Debt, Credit Score

How Credit Card Debt Impacts Your Credit Score

Most consumers utilize a credit card at some point in their lives, and many of them carry credit card debt from month-to-month. While using credit cards responsibly can help increase a person’s credit score, having too much credit card debt can cause significant harm to that score.

The amount of debt you owe on your credit card is one of the biggest factors affecting your credit score. That’s why it is never a good idea to max out your credit card. And when your credit score goes down, you could end up having to pay higher interest rates on loans or any other credit you apply for. A low credit score can impact your applications for apartment rentals, cell phone plans, and more. Research by the Consumer Financial Protection Bureau has indicated that high income earners are as prone to financial stress because of debt as low-income earners.

Consumer Debt, Credit Score

Millions of Debt Collections Disappear from American Consumers’ Credit Reports

Millions of debt collections disappeared from American consumers’ credit reports during the COVID-19 pandemic, according to reports from the Consumer Financial Protection Bureau (CFPB). Even though a large number of collections cases dropped off credit reports, overdue medical debt still remains a major consumer problem.

According to the CFPB, the total number of debt collection cases on consumer credit reports went from 261 million in 2018 to 175 million in 2022, dropping 33 percent (33%). Additionally, the number of consumers who had a debt collection on their credit report decreased by 20 percent (20%) between 2018 and 2022.

Medical Debt

Medical Debt May No Longer Affect Your Credit Score

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.

Consumer News, Predatory Lending Practices

Consumers Being Lured Into Predatory Car Repair Loans

Predatory lending practices are becoming more common when it comes to companies attempting to “help” consumer fund car repairs. Many of the major car repair shops, including AAMCO, Jiffy Lube, Midas, Precision Tune Auto Care, Grease Monkey, and Meineke, are offering financial assistance to consumers who are not able to pay for their car repair expenses. The problem is, these car repair loans can end up charging up to 189 percent interest, according to a recent study by Consumer Reports.

Many states have laws issuing caps on interest rates to avoid predatory lending practices. However, companies have become wise to these laws and evade them by teaming up with a bank in a state that does not have an interest rate cap. This practice is also known as “rent-a-bank,” and it falls into a legal gray area.

Debt Collection

What Consumers Need to Know About Debt Collection Rules ‘Regulation F’

Several new debt collection rules have been announced by the Consumer Financial Protection Bureau (CFPB). These rules, through what is called Regulation F, offer greater control to consumers over the various method and times they will be able to be contacted by debt collectors.

Regulation F was implemented by the CFPB on October 30, 2020, and December 18, 2020. The regulation was created to interpret the Fair Debt Collection Practices Act (FDCPA). The FDCPA is meant to protect consumers from abusive collection tactics by third-party debt collectors. Regulation F officially went into effect on November 30, 2021. The FDCPA and the regulations included in Regulation F apply only to third-party debt collectors and not original creditors.

Debt Collection, Debt Consolidation, Debt Settlement

Can Settling a Debt Harm Your Credit?

Escaping debt can be a long, arduous process. Many times, consumers find success in working with the creditor directly on settling the total amount owed, satisfying the debt by paying an amount that is much smaller than what was originally owed. While debt settlement can lift the burden carrying a large amount of debt places on a consumer, it also comes with its negative attributes, as well. In fact, according to new reports, debt settlement can actually end up harming a consumer’s credit score more than it helps.

A debt settlement can lower a person’s credit score by 100 points or more, according to the National Foundation for Credit Counseling. It can take up to seven years to recover from that negative hit.  

Medical Debt

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

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.

Debt Collection, Debt Relief

CFPB Announces Two Final Debt Collection Rules to Go into Effect November 30

The Consumer Financial Protection Bureau (CFPB) announced two final debt collection rules which are scheduled to take effect on November 30, 2021. These two rules clarify and add further detail to provisions of the Fair Debt Collection Practices Act (FDCPA), the law that offers protections to consumers from abusive or unfair collection practices from third-party debt collectors.

These rules were originally going to be made effective in the spring, but the CFPB delayed the effective date by 60 days to allow all affected parties time to comply due to the COVID-19 pandemic. However, after making the announcement regarding a 60-day delay, the CFPB determined that the extension was not needed and published the official notice in the Federal Register officially withdrawing the extension.