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Medical debt reforms help few people

Many people in Virginia who are struggling with medical debt should not expect too much from two recent reforms. Starting Sept. 15, credit bureaus will be required to wait 180 days before reporting medical debt on a person's credit report. Furthermore, if a bill goes into collections and is paid by an insurer, it will be deleted from the credit report.

These reforms were put in place to help people when an insurer delays in paying a bill. However, there are many more people who simply do not have the money to pay their medical debts or get tired of waiting on the insurer and simply pay the debt themselves. A study by FICO, the leading credit scoring company, found that the 180-day delay in reporting will only help around 200,000 people. The reason is that medical debts are generally not reported to the credit bureaus until this time period is up anyway.

As for the other provision, of the 43 million people whose credit reports include medical collections, fewer than 8 percent of those collections are paid. It is unclear how many were paid by insurers and how many were paid by consumers, but there will be no benefit for the more than 90 percent of people whose medical collections are still unpaid.

Filing for bankruptcy as a result of medical debt or other types of debt may be right solution for some people. One immediate relief in filing for bankruptcy is that it stops creditor harassment and any lawsuits against the debtor. A Chapter 13 bankruptcy may allow a person to keep some assets including a home. The individual must have enough income to work out a payment plan that repays creditors over three to five years.

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