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Congress acts to solve problem of medical debt

On Behalf of | May 16, 2013 | Chapter 13 Bankruptcy, Firm News

Medical debt is one of the most confusing types of debt, largely because it is prone to signficant errors on the part of healthcare providers and debt collection companies. In fact, even though error rates have dropped, one out of every ten medical debt claims still contains a mistake. 

Often, a mistake is not known to the person it affects until years later, when they refinance their home or take out a car loan. 

For people who are victims of these mistakes, it can cost thousands of dollars when translated to a lower credit score and less favorable loan terms. Past due medical debt is also associated with direct costs, burdening people who are already out of work from an illness or partially disabled with high fees and penalties.

Luckily, Congress has taken action to try to offer relief for people who hold medical debt by regulating the impact that medical debt can have on one’s credit score. One bill has already been introduced to this end – the Medical Debt Responsibility Act – and others are reportedly in the works. It seems that lawmakers on both sides of the aisle are in agreement that something must be done to help Americans who are struggling with medical debt.

Medical debt is one of the types of debt that can be discharged or modified during a Chapter 13 bankruptcy proceeding. As always, people seeking to discharge medical debt through bankruptcy must show that they lack the income and assets to pay off the debt without restructuring. 

Source: Forbes, “Good News (Finally) When it Comes to Medical Debt Reform,” Adam Levin, May 13, 2013. 

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