Does Medical Debt Really Go Away After Seven Years?


Like all urban myths, the “seven-year rule” does contain a small kernel of truth. But sorry, folks, it’s just not that easy.

Here on the OppLoans Financial Sense Blog, we’ve written about all kinds of debt. Payday loan debt. Student debt. Blood debts. (Okay, maybe not that last one.) And while there are always going to be some differences between the ways different kinds of debt are handled, for the most part, it’s all pretty much the same.

But recently one of our writers shared a story regarding medical debt that had us a little bit floored. We decided to let her tell it firsthand. She writes:

I was scrolling on Facebook a few months ago when a post from a friend who’d been having medical issues caught my eye. She was uninsured and had for the past few months been dealing with a chronic illness that left her in and out of the emergency room on a weekly basis. The post was a photo of her latest hospital bill, a whopping $60,000 charge she had absolutely no way to pay.

“File this under ‘things I’ll be ignoring for the rest of my life,'” she wrote, ending with a laugh-cry emoji that seemed to perfectly encapsulate the futility of her situation. In the comments below, dozens friends and family expressed shock and sympathy for her plight, and I noticed a theme. Many of the commenters seemed to think that she didn’t NEED to pay off those bills.

“Don’t worry about it,” wrote one man. “Medical debt disappears after seven years. You’ll have bad credit until then but after the seven-year mark you’ll be home free!”

This comment had several likes and affirmations under it. I sat there staring at it for a few moments, wondering why this idea seemed to have so much consensus behind it. It couldn’t possibly be true, right? Why even bill anyone for medical services if they’re not actually required to pay that balance off?

Weird, right?

Well, spurred by the popularity of this strange belief, we did some research. Unfortunately for our coworker’s friend, and all the fervent believers in the seven-year rule, it’s not quite that simple. However…

The seven-year figure DOES come from somewhere

The belief that medical debt will magically disappear after seven years might not be entirely accurate, but there are actually laws in place that limit the amount of time that any unpaid bill can stay on your credit report.

According to provisions in the Fair Credit Reporting Act, most accounts that go into collection can only be reported on your credit report for up to seven years. After that, they can’t negatively affect your credit score and shove potential lenders and landlords towards the door.

There are, of course, some exceptions to this rule. Chapter 7 bankruptcy filings stay on your credit report for 10 years. Judgments stay either seven years or until the statute of limitations in your state is up, whichever is longer. Unpaid student debt? That will stay on your credit report for-ev-er.

But medical debt won’t! While unpaid medical bills will come off your credit report after seven years, you’re still legally responsible for them. Taking those debts off your report just means they will no longer be held against you when you apply for a loan, an apartment, or a job, which is definitely a good thing.

There’s also a six-month buffer period during which new medical debt cannot appear on your report

Additionally, a new law went into effect in September 2017 states requires the three major credit bureaus—Equifax, Experian and TransUnion—to now give patients a 180-day grace period to resolve their medical debt before it shows up on their credit reports.

According to a report from the Consumer Financial Protection Bureau, one out of five credit reports contain unpaid medical debt, and per Experian, the six-month rule was, “designed to help people with a common dilemma—the need for time to make necessary payments or finalize issues with insurers. Once a medical debt gets paid, check that the listed account is removed from your credit report. If an account is 180 days old and unpaid, it will be added to a consumer’s credit file.”

“Under the current system, consumers can find themselves trapped in limbo, stuck with bills while waiting for their healthcare provider to reimburse them for approved expenses. During this period, any gathered debts that are left unpaid can hurt their credit scores,” wrote Matt Tatham on the Experian blog back in August.

State-by-state statutes of limitations on debt collection may also fuel the seven-year myth

Many states have laws on the books that limit the amount of time that a debt is enforceable or the amount of time that collectors, lenders, or creditors have to use the court system to legally force you to pay for a debt.

Different categories of debt have different limits, but in general, most debt falls into these four categories:

  • Oral Agreement: A debt agreement made verbally with no written documentation.
  • Written Contract: A debt agreement made in writing and signed by both parties. Medical debt is a written contract.
  • Promissory Note: A debt agreement made in writing and signed by both parties which includes a deadline for payback and information on the interest rate. Most mortgages and student loans are promissory notes.
  • An Open-Ended Agreement: A debt agreement made in writing on an account with a revolving balance. Credit cards are open-ended agreements.

Statute of Limitations by State (via The Balance)

Alabama6 years6 years6 years3 years
Alaska6 years6 years3 years3 years
Arizona3 years6 years6 years3 years
Arkansas6 years6 years3 years3 years
California2 years4 years4 years4 years
Colorado6 years6 years6 years6 years
Connecticut3 years6 years6 years3 years
Delaware3 years3 years3 years4 years
Florida4 years5 years5 years4 years
Georgia4 years6 years6 years4 years
Hawaii6 years6 years6 years6 years
Idaho4 years5 years5 years4 years
Illinois5 years10 years10 years5 years
Indiana6 years10 years10 years6 years
Iowa5 years10 years5 years5 years
Kansas3 years6 years5 years3 years
Kentucky5 years15 years15 years5 years
Louisiana10 years10 years10 years3 years
Maine6 years6 years6 years6 years
Maryland3 years3 years6 years3 years
Massachusetts6 years6 years6 years6 years
Michigan6 years6 years6 years6 years
Minnesota6 years6 years6 years6 years
Mississippi3 years3 years3 years3 years
Missouri5 years10 years10 years5 years
Montana5 years8 years8 years5 years
Nebraska4 years5 years5 years4 years
Nevada4 years6 years3 years4 years
New Hampshire3 years3 years6 years3 years
New Jersey6 years6 years6 years6 years
New Mexico4 years6 years6 years4 years
New York6 years6 years6 years6 years
North Carolina3 years3 years5 years3 years
North Dakota6 years6 years6 years6 years
Ohio6 years15 years15 years6 years
Oklahoma3 years5 years5 years3 years
Oregon6 years6 years6 years6 years
Pennsylvania4 years4 years4 years4 years
Rhode Island15 years15 years10 years10 years
South Carolina3 years3 years3 years3 years
South Dakota3 years6 years6 years6 years
Tennessee6 years6 years6 years6 years
Texas4 years4 years4 years4 years
Utah4 years6 years6 years4 years
Vermont6 years6 years5 years3 years
Virginia3 years5 years6 years3 years
Washington3 years6 years6 years3 years
West Virginia5 years10 years6 years5 years
Wisconsin6 years6 years10 years6 years
Wyoming8 years10 years10 years8 years

In general, the statute of limitations on debt collection starts from the last payment you make. Many debt collectors will continue to call and try an enforce collection even after the statute is up because they know most people aren’t aware of their rights under these laws.

It’s important to note, however, that just because you can’t be legally sued to pay up after the statute of limitations expires, that doesn’t mean the debt no longer exists. It’s still there, and it’s still your responsibility. Creditors can try to take you to court over the debt, but if you can prove the statute of limitations has passed, they won’t win their lawsuit against you.

So can you just ignore medical debt until it stops affecting your life?

In theory, sure. If you can deal with years of bad credit and harassing phone calls, and if you can somehow avoid getting sued for your debt before the statute of limitations on your medical debt is up, you may reach a point about a decade in the future where you’re no longer hounded every day about paying off those old hospital bills. But it’s never going to truly disappear.

If you don’t want to deal with years of hassle, you might want to try and work something out directly with the hospital. After all, a hospital is a business, and they need people to pay their bills so they can, in turn, pay their staff, buy new medicine and equipment, and keep helping people recover from illnesses and injuries. Most hospitals will be willing to work with you to reduce your debt or make a settlement payment at a fraction of the cost.

“It is absolutely possible to negotiate a medical bill,” said John Barnes, a certified financial planner and owner of My Family Life Insurance (@MyFamilyLifeIns), in a recent OppLoans eBook on managing medical debt.

“I generally don’t recommend negotiating small bills such as copays, but when your out-of-pocket costs start in the hundreds, then it may make sense. It is as simple as asking the hospital or doctor’s office if they have a cash payment policy. This can be a starting point. You can also propose a discount to them as well. Let’s say the bill is $500. You can say, ‘All I can pay is $300. Is that acceptable to you?’ While some may push back, most won’t.”

To learn more about dealing with medical expenses, check out these related posts and articles from OppLoans:

Have you encountered the seven-year myth before? Let us know! You can email us or you can find us on Facebook and Twitter.

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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.