CFPB Considers Banning Medical Debt From Credit Reports
Many debtors who file for consumer bankruptcy do so, at least in part, as a result of insurmountable medical debt. For those debtors, Chapter 7 bankruptcy offers a way to have most medical debt discharged and to get a fresh financial start in order to begin rebuilding credit. If medical debt were no longer reported by credit bureaus and it did not affect a consumer’s eligibility for loans and other forms of credit, would overall rates of personal bankruptcy decline? According to an article in The New York Times, the Consumer Financial Protection Bureau (CFPB) is considering the possibility of banning medical debt from consumer credit reports. What else do you need to know about this proposal and how it could affect consumer debt and bankruptcy filings?
Medical Debt is Harming Consumers
Even before the start of the COVID-19 pandemic, consumers struggled with many different types of consumer debt, including substantial medical bills. Even with health insurance, an unexpected medical emergency or a serious diagnosis can result in tens of thousands of dollars of medical debt. Many consumers—including those who have otherwise been careful financially up to that point—may be unable to pay off the medical debt and may find themselves considering the possibility of bankruptcy. With the pandemic, even more Americans have taken on medical debt as a result of COVID-19 hospitals and other related medical care, some for “long Covid.” The CFPB is taking a close look at consumer medical debt and considering whether there is a way to limit its effect.
According to the article, the CFPB has been discussing plans for prohibiting medical debt from appearing on credit reports or affecting an individual’s credit rating. In a report based on recent research, the CFPB noted that “20% of American households say they have medical debt,” and “more than half (58 percent) of the debt that appears on credit reports as being in collections stems from medical bills.” Rohit Chopra, the current CFPB director, said the proportion of medical debt in collections is “extraordinary.”
It is not fair to consumers, Chopra suggested, to have debt for necessary medical care harming their ability to live fulfilling lives. Indeed, Chopra said, “having a medical debt collection mark on a credit record can make it harder to get credit, rent or buy a home, or find a job.” Chopra underscored that “families are pushed into bankruptcy by medical debts that they cannot pay,” and many of those families are Black and Hispanic Americans.
Involuntary Nature of Medical Debt
Why is the CFPB considering changes to the way medical debt is reported? In large part, as Chopra explained, medical debt is unlike other types of debt in that it is “incurred involuntarily.”
If medical debt is not reported on credit reports and it does not affect an individual’s ability to obtain credit or to get a certain job, bankruptcy filings could look significantly different in the future. To be sure, fewer Americans may be filing for bankruptcy, and a majority of those cases may not involve significant medical debt.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about managing medical debt as a consumer, or do you have questions about your eligibility for consumer bankruptcy? An experienced Oak Park bankruptcy attorney at our firm can begin working with you today. Contact the Emerson Law Firm to learn more about how our firm serves consumers in the Chicago area.
See Related Blog Posts:
CFPB Report Addresses Consumer Medical Debt
How Consumer Bankruptcy Reflects Larger Economic Trends
Medical Debt is Harming Consumers
Even before the start of the COVID-19 pandemic, consumers struggled with many different types of consumer debt, including substantial medical bills. Even with health insurance, an unexpected medical emergency or a serious diagnosis can result in tens of thousands of dollars of medical debt. Many consumers—including those who have otherwise been careful financially up to that point—may be unable to pay off the medical debt and may find themselves considering the possibility of bankruptcy. With the pandemic, even more Americans have taken on medical debt as a result of COVID-19 hospitals and other related medical care, some for “long Covid.” The CFPB is taking a close look at consumer medical debt and considering whether there is a way to limit its effect.
According to the article, the CFPB has been discussing plans for prohibiting medical debt from appearing on credit reports or affecting an individual’s credit rating. In a report based on recent research, the CFPB noted that “20% of American households say they have medical debt,” and “more than half (58 percent) of the debt that appears on credit reports as being in collections stems from medical bills.” Rohit Chopra, the current CFPB director, said the proportion of medical debt in collections is “extraordinary.”
It is not fair to consumers, Chopra suggested, to have debt for necessary medical care harming their ability to live fulfilling lives. Indeed, Chopra said, “having a medical debt collection mark on a credit record can make it harder to get credit, rent or buy a home, or find a job.” Chopra underscored that “families are pushed into bankruptcy by medical debts that they cannot pay,” and many of those families are Black and Hispanic Americans.
Involuntary Nature of Medical Debt
Why is the CFPB considering changes to the way medical debt is reported? In large part, as Chopra explained, medical debt is unlike other types of debt in that it is “incurred involuntarily.”
If medical debt is not reported on credit reports and it does not affect an individual’s ability to obtain credit or to get a certain job, bankruptcy filings could look significantly different in the future. To be sure, fewer Americans may be filing for bankruptcy, and a majority of those cases may not involve significant medical debt.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about managing medical debt as a consumer, or do you have questions about your eligibility for consumer bankruptcy? An experienced Oak Park bankruptcy attorney at our firm can begin working with you today. Contact the Emerson Law Firm to learn more about how our firm serves consumers in the Chicago area.
See Related Blog Posts:
CFPB Report Addresses Consumer Medical Debt
How Consumer Bankruptcy Reflects Larger Economic Trends
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