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What happened to my paid-off medical debt?

On Behalf of | Nov 7, 2022 | Bankruptcy

For those who have settled or paid-off their medical debt or the medical debt of a loved one, you probably periodically check your credit report and lament that that debt still hurts you. If you checked your credit report recently, though, you may wonder, “What happened to my paid-off medical debt?”

Debt in general

Indeed, generally, once a debt has been negatively reported on your Brooklyn, New York, credit report, it stays there, even if you settle or pay it off. Normally, it stays there for up to 7 years. In practice, this meant that, if you paid off or settled your medical debt that was already on your credit report; it stayed there for up to 7 years.

The medical debt is gone!

Starting at the beginning of July, paid off and settled medical debt was automatically removed from your credit report. In fact, if your paid off and settled medical debt is still there, you can now request its removal. This likely increased your credit score, and it definitely increased your morale.

Changes to how medical debt is reported

Now, the three major credit reporting bureaus (Equifax, Experian and TransUnion) will remove medical debt once it is settled or paid off. In addition, it can no longer be put on your credit reports until it is at least a year old. And, starting next year, any debt under $500 will not be allowed on Brooklyn, New York, credit reports.

Positive effects

The immediate effects are that your credit score will go up. However, these changes will also give those with medical debt a larger ability to negotiate with medical providers as they know it will not hit your credit report for a year. And, for smaller debts that are too small to litigate, medical providers may take anything to resolve the debt.

Why the change?

At the beginning of this year, the Consumer Financial Protection Bureau released a scathing report on Equifax, Experian and TransUnion and medical debt reporting. It found that the vast majority of medical debt reporting was wrong or erroneous. As such, rather than waiting for the CFPB to take action, the credit bureaus announced these changes.

However, keep in mind that none of this stops medical providers from suing you for your medical debts, or harassing you about them. This is why bankruptcy is still a needed option.