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New Bill to Keep Unpaid Medical Bills of a Credit Report

By Faye Mergel
Published: Thursday, December 10th, 2009

Most people who suffer long term illness also suffer from another major problem: huge medical bills. While fighting with their illness, they must also struggle to meet those bills or end up with seeing their credit report ravaged by delinquencies or loan defaults. Accumulating those items in a credit report would not only ruin a person’s ability to borrow, it will likewise prevent him from getting back on the right financial track.
Fortunately, lawmakers are pushing a bill that would keep those medical debts from hounding a credit report.

New Bill to Keep Unpaid Medical Bills of a Credit ReportThe American Journal of Medicine reported this August that medical debt is among the primary causes of bankruptcy. The magazine found out that either medical debts or loss of income due to illness accounts for 62.1 percent of all the bankruptcies declared in 2007. The authors added that the number of bankruptcies caused by medical expenses went up by nearly 50 percent from 2001 to 2007.

Analysts say it is quite alarming that people who are uninsured are just hit as hard as those who are insured. The study further revealed that around 75 percent of people declaring for bankruptcy because of medical expenses were covered by health insurance.

People who declare bankruptcy are most likely to see their finances crumble down because of their decreased ability to borrow. Bankruptcy will remain on a credit report for several years and would place a person in a severe disadvantage. Most of them will not be able to get a credit card, car loan, or mortgage or just about any line of credit. Worse, they may find it hard to find a decent place to live or a good job because landlords and employers pull out a credit report before making any decision.

People who manage to meet their medical bills by paying them off or through a settlement but were unable to do so before their debts went into collection see their credit report tarnished for seven years.

But things could change for the better if the bill proposed by Rep. Mary Jo Kilroy, a Democrat from Ohio, becomes legislation. Along with other lawmakers, she is proposing that any medical debt that has either been paid off or settled must be removed from a credit report within 30 days.

Consumer advocacy groups are supporting the proposal, citing a study by the Commonwealth Fund indicating an increased number of people who are now able to keep up with their medical expenses. The study shows that about 72 million or nearly half the population of working adults are behind their medical payments.

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