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Changes coming to medical debt credit reporting

Medical debt can be a serious problem for Florida residents. It is estimated that 43 million Americans have delinquent medical bills on their credit reports, but changes to reporting that will take effect on Sept. 15 could help some people, though experts say it won’t help enough.

As part of two 2015 settlements with state lawyers general, credit bureaus Equifax, TransUnion and Experian agreed to two new changes. The first is that unpaid medical bills will not be put on someone’s credit report for 180 days, and the second is that medical collections will be removed from a person’s credit report if they are paid by health insurers.

The problem, according to observers, is that these changes won’t help people who can’t afford to pay their medical bills or who pay off them off instead of waiting for their health insurer to pay. Only 8 percent of medical collections on Americans’ credit reports are listed as paid. It is estimated that only a fraction of those were paid by insurers, and therefore eligible under the new rules to be deleted from reports.

FICO says that the 180 day waiting period on reporting won’t help many people either. FICO and VantageScore are on board with the Consumer Financial Protection Bureau’s view that medical debt should not have the same impact on people’s credit scores as other types of debt. Both FICO and VantageScore ignore all paid collections in the latest versions of their scores, but these latest versions aren’t in widespread use yet.

Medical debt is dischargeable in bankruptcy, along with credit card and some other types of debt. For people who either don’t qualify for Chapter 7 bankruptcy or who have a steady income and want to be able to pay off most of their debt but need an affordable monthly payment, Chapter 13 bankruptcy could be a solution. An lawyer could discuss in detail how Chapter 13 works.

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