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What a bankruptcy attorney has to say about medical debt being eliminated from your credit report
Shaquira Speaks – January 7, 2025
CHARLOTTE, N.C. (QUEEN CITY NEWS) –The Biden administration announced a new policy Tuesday to help more than 15 million Americans by banning medical debt from appearing on credit reports.
The Consumer Financial Protection Bureau’s rule will remove $49 billion in debt from those reports, raising credit scores by an average of 20 points.
For many people, medical debt on their credit reports can lower their scores, affecting their ability to buy a home or car or apply for new loans.
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A Charlotte bankruptcy attorney says although that debt won’t show up on those reports anymore, he believes creditors will find a new way to make sure those debts are paid.
“So it is a really important thing,” explained Ruth Lande, vice president of Provider Relations at Undue Medical Debt. “Most people know that medical debt is not like other debts. It’s not the same kind of a debt of choice. And so to have those kinds of repercussions on a credit report affecting your ability to get housing or get a car or different things, that is really not what the credit system should be about.”
It’s a national nonprofit using donations to buy large bundles of unpaid medical bills to help Americans out of debt. Lande says clients say those debts stress customers — and deter them from seeking medical care.
“Patients want to pay their bills, and studies from Kaiser Family Foundation show that four-in-10 adults have these kinds of debts and that it’s affected their willingness to go and seek care or family members seeking care because they’re afraid of the cost. So, fear and anxiety and depression are really a big issue around medical debt.”
Charlotte bankruptcy attorney Rashad Blossom says more than 50 percent of his clients have unpaid medical debt. But, he says it may be too early to tell how much the new rule will really help.
“On one hand, the concern is, are creditors going to get aggressive in other areas, or will they start suing people?” Blossom said. “Will they start harassing them because that credit reporting debt collected tool has been taken away? So, it could be the case that drives more bankruptcies as creditors get more aggressive in other areas. On the other hand, it’s good for the consumer that this is not being reported because now, that’s one less concern about them being able to buy a home.”
The final rule is set to take effect in March – but that timeline could be delayed by legal challenges.
“So, the bottom line is it is just too early,” Blossom said. “We don’t know yet, but the concerns are there that it could be counterproductive.”