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Medical debt reporting reforms help few people

Only a few people in Massachusetts who have medical debt will be affected by a reform in reporting this debt to credit bureaus. Under the new regulations, which go into place on Sept. 15, before debt appears on a person's credit report, there will be a waiting period of 180 days. Furthermore, if health insurers pay medical collections, those debts will be deleted from the report.

Unfortunately, the waiting period reform will only help about 0.1 percent of the 220 million people who have a credit report. A 180-day wait in reporting this debt is fairly standard for medical providers. As for the other reform, fewer than 8 percent of the 43 million people with medical collections on their credit report have collections that are marked as paid. It is unclear how many of those were paid by insurers and how many by the consumer, but it does indicate that few people will be helped by the removal of the item.

Some lawmakers, consumer advocates and the Consumer Financial Protection Bureau have said that medical debt should have less impact on people's scores since health care costs are so high and so many people have medical debt. While this reform is underway, it has not yet been implemented by credit reporting agencies, and it is unclear when it will be.

It is often life events and not irresponsibility that causes medical debt and other types of debt to mount. People struggling with debt may fear that if they declare bankruptcy, they will lose everything or they will never be able to repair their credit. However, with a Chapter 13 bankruptcy, people can work out a payment plan that may allow them to stop foreclosure. This is a debt reorganization bankruptcy that allows consumers to create a repayment plan.

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