Many Colorado residents with extensive medical treatment have considerable medical debt that they have difficulty paying. Unpaid medical bills can damage consumer credit scores, making it difficult to get loans, secure a new job, etc. However, a new initiative announced in September 2023 by the Biden Administration could wipe medical debt off credit reports.
Debt protection may be a lengthy process
Massive medical debt affects millions of Americans, leading many to file bankruptcy. Many people burdened with medical debt take second and third jobs. They must ration food and other necessities as they attempt to pay. The proposed rules are expected to significantly restrict credit reporting by hospitals and other medical providers.
The government has tapped the Consumer Financial Protection Bureau (CFPB) to develop the new rules, which should be revealed sometime next year. However, the rule may take some time to implement because the agency has come under fire from some Republicans. The agency’s future may also be jeopardized due to a case before the Supreme Court.
Medical bills not always an indicator of credit risk
While one unpaid medical bill may not significantly affect someone’s credit, multiple unpaid bills do, especially if the amounts are more significant. However, the CFPB has found that medical bills do not indicate creditworthiness for loans, credit cards and the like. The three major credit bureaus have already eliminated reporting bills under $500.
What will this mean for my debt?
Medical debt is the leading cause of personal bankruptcy in the United States. If you currently have a high amount of debt in other areas, along with medical debt, the revised rules may come too late for you, so filing Chapter 7 or Chapter 13 may be a better option at the moment.
If your debt only involves medical bills, consider talking to a financial advisor to determine whether you should file bankruptcy now or wait to see what happens with the Biden Administration initiative. Those with new medical debt may also want to wait and see before filing bankruptcy.