Should I settle or pay off my medical debt?

On Behalf of | Aug 9, 2022 | Bankruptcy |

Over the past few years, the topic of medical debt has never been hotter. And, after the Consumer Financial Protection Bureau released a report early this year finding that most medical debt was reported erroneous, the three major credit bureaus changed how medical debt will be handled. However, does that mean that it is now time to settle or pay off your Mobile, Alabama, medical debt?

Medical debt

Medical debt accounts for about $200 billion in the United States, according to the Kaiser Family Foundation. According to the CFPB, of that $200 billion, $88 billion is on our credit reports. And, before anyone thinks that this debt is owed by a relatively few extremely sick individuals, KFF reports that approximately 40% of adults have medical debt. Most of that debt is over $1,000.

The new debt policies

Beginning on July 1, settled and paid-off medical debt was erased from credit reports, along with all medical debt that is not at least 12 months old. In 2023, medical debts below $500 will also fall off credit reports.

What does that mean?

For many of our Mobile, Alabama, readers, this means that their credit score should have risen last month or this month, but you will need to check your credit report to make sure. If there are still paid-off debts or debts that are under 12 months on your report, dispute them. That should correct them within 30 to 60 days.

What about those who still have medical debt?

The new policies from the credit bureaus will not affect those who are fighting Mobile, Alabama, medical debt right now. For those people, these new policies may make it a good option to settle or pay off medical debt, but depending on one’s specific financial situation, it still may not be a good option. Instead, those struggling with medical debt should look into bankruptcy and speak with a financial or legal professional to help decide what option is best for you.