Does Medical Debt Really Go Away After Seven Years?
Because debt can be destructive to financial health, it’s not surprising that some may hope for it to just go away on its own.
For example, one common belief is that medical debt vanishes entirely after seven years. While medical debt is -- in some ways -- an easier type of debt to manage than high-interest consumer debt, it will not just always go away entirely after seven years, although it could stop negatively impacting your credit report.
One of our writers shared a story about medical debt that she saw on social media. We decided to let her tell it firsthand:
I was scrolling on Facebook … when a post from a friend who’d been having medical issues caught my eye. She was uninsured, and [for the past few months, had] 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.
In the comments below, dozens of 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.
One commenter encouraged her not to worry about it, as he believed that her medical debt would disappear entirely after seven years. He noted that she would have bad credit until then, but after seven years it would all correct itself.
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?
Unfortunately, for this friend, and all the fervent believers in the seven-year rule, getting rid of medical debt is not quite that simple.
The 7-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 consumer laws in place that limit the amount of time certain negative information can stay on your credit report. This includes medical debt.
According to provisions in the Fair Credit Reporting Act, most accounts that go to collections can only remain on your credit report for a seven-year time period. After that, they shouldn't negatively affect your credit score anymore.
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. And here’s one more caveat: While unpaid medical bills will come off your credit report after seven years, you may still be legally responsible for them depending on the statute of limitations. Removing 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.
The 12-month buffer for new medical debt
In July 2022, the three major credit bureaus — Equifax, Experian, and TransUnion — implemented a new rule to give patients a 365-day grace period to resolve their medical debt before it shows up on their credit reports. These credit reporting companies have also taken steps to remove all medical collections under $500, effective April 11, 2023.
“To help standardize medical debt reporting and protect consumers' credit reports from being unduly affected by medical debt, the three major credit bureaus (Experian, TransUnion and Equifax) now employ a 365-day waiting period before unpaid medical collections debt appears in your credit history. This yearlong grace period is designed to give you enough time to correct any errors on your bill, pay the bill or get your insurance company to pay it, figure out a payment plan or otherwise resolve the problem. By taking action within the year, you can prevent medical bills from hurting your credit score.”
If you have health insurance, you’re probably paying more than enough in premiums. Your credit score shouldn’t take a hit for medical procedures that are covered anyway.
Statutes of limitations on debt collection
In addition to federal law, many state laws limit the amount of time that an old debt is enforceable, or they set a time limit for which collectors, lenders, or creditors can 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. Your medical debt may be considered a written contract.
- Promissory note: A debt agreement made in writing and signed by both parties that includes a deadline for payback and information on the interest rate. Most mortgages and student loans are considered 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.
In some states, the statute of limitations on debt collection starts from the last payment you make. It’s important to note, however, that just because the statute of limitations expires, that doesn’t necessarily mean the debt no longer exists. In many states, debt collectors may still attempt to collect debts after the expiration of the state’s statute of limitations, so long as they do not violate the law in doing so. If you have any questions about the law, consider consulting with a qualified attorney.
Dealing with medical debt
Financial coach and CPA, Allison Bishop, recommends speaking to a hospital’s billing department as soon as you can. She points out that hospitals do not make much money from selling their debts to collection agencies. That means they will likely be open to working out a payment plan or even accepting partial payment.
“Unless your medical debt goes into collections, you probably won't see it on your credit report, as medical practices aren't typically in the habit of reporting to the credit bureaus,” Bishop says.
Medical debt might not be as damaging as some other forms of debt. But you may be better off trying to address it instead of waiting and hoping it will just go away.
Allison V. Bishop, CPA is a financial coach in Portland, Maine. She began her financial coaching practice in 2015, after seeing a real need for unbiased personal financial advice. She provides individual financial coaching and informational workshops, as well as employer-sponsored financial wellness programming.
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