How medical debt can affect credit scores

 Posted on May 28, 2019 in Medical Debt and Bankruptcy

Even the most financially responsible person in Maryland can have difficulty keeping up with obligations when faced with mounting medical debt. According to Consumer Reports, 3 out of every 10 Americans has unpaid medical debt of $500 or more. This type of debt can have an adverse effect on credit scores and contribute to other financial difficulties.

The bright spot with medical debt is that it's treated differently than other forms of debt. Healthcare providers do not directly report it to credit reporting agencies. But if an outstanding balance remains unpaid, they often pass it along to a collection agency, and they may then report it. However, the three leading agencies do not officially report the debt to credit bureaus until 180 days of delinquency. Furthermore, a widely used credit reporting model does not consider balances under $100.

Patients with medical debt obligations are advised to be proactive as much as possible to minimize potential issues that could affect the ability to secure loans, buy a home, and obtain new credit. Such efforts could include reviewing a health insurance company's Explanation of Benefits to develop a better understanding of what portions of a bill are the responsibility of the patient. Individuals receiving medical care are also advised to regularly review monthly statements and request an itemized bill. In some instances, it may be possible for a patient to work out a mutually agreeable payment plan with a medical provider.

The Fair Debt Collection Practices Act allows patients to receive copies of debts in writing within 30 days of receiving notice. But for times when medical debts are legitimate and it's not possible to keep up with payments, a consultation with a bankruptcy attorney may be beneficial. Personal bankruptcy might allow an individual overwhelmed by outstanding balances to stop collection efforts and develop a reasonable repayment plan.