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Medical debt and credit reports

The case of a 67-year-old man who saw his credit score drop to 660 due to an unknown medical debt is a common one in New Jersey and around the country. His story began when he had a stroke in June of 2012 and was admitted to a hospital for treatment. Although his insurance covered most of the cost of treatment, he was sent a room charge of $640.

He claims that he contacted the hospital and settled the bill for $128, which is what he says he owes under Medicare. That amount would be the 20 percent that he would have to pay for outpatient care under his plan. However, the hospital says that there was no record of the bill being paid and that the debt is a valid one.

As a result, he was contacted by a collection agency which the man said contacted him at least twice a week. Although the calls eventually stopped, he now has an unpaid medical debt on his credit report that will not go away for at least seven years even if the bill is paid. The only way that the debt disappears is if the hospital reverses its decision. The proposed Medical Debt Responsibility Act, which was introduced last year in the House of Representatives but has not been acted on, would help ease the burden as it would require medical debt to be removed from a credit report 45 days after the balance is resolved.

A creditor that decides to take legal action against a debtor could have the debtor’s wages garnished or bank accounts seized. This may make bankruptcy one of the prime options available to help individuals in this situation resolve their debt.

Source: PostBulletin.com, “Medical debt can lurk on credit reports“, Tim Grant, June 20, 2014

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