If you’ve ever been uninsured, under-insured, or had a high co-pay that you couldn’t afford, you may be faced with some medical debt. But what happens if you just don’t pay it? Does it ever go away?.
These are all good questions. The short answer is that medical debt may disappear from your credit report after seven years, but that doesn’t mean you’re off the hook. Medical debt never expires. It does have a statute of limitations, however, but it works differently than you might think.
Medical debt can make it hard to pay your bills and keep your credit score high. A common belief is that medical debt goes away on its own after seven years. Is this really true, though? Let’s find out what happens to medical bills that aren’t paid over time.
The Origins of the Seven Year Rule
Where does this idea that medical debt disappears after seven years come from? It likely stems from provisions in the Fair Credit Reporting Act (FCRA) The FCRA limits how long negative information can remain on your credit report Most collections accounts, including medical debt, can only stay on your report for seven years.
So after seven years, unpaid medical debt falls off your credit report. The debt doesn’t vanish completely, but it will no longer impact your credit score. This is where the myth originated that medical debt goes away entirely after seven years.
Important Exceptions
There are some key exceptions to this seven year credit reporting rule
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Chapter 7 bankruptcy stays on your credit report for 10 years.
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After seven years or until the end of the time limit in your state, judgments will still show up on your report.
If your state has a longer statute of limitations, medical debt judgments could last longer than seven years.
Statutes of Limitations on Debt Collection
The statute of limitations sets a time limit for when a creditor can sue you to collect a debt. This varies by state and type of debt. For medical debt, statutes of limitations range from 3-6 years generally.
Just because the statute of limitations expires doesn’t mean the debt legally disappears. You could still owe it, but creditors can no longer take you to court for it. The debt may continue appearing on your credit report too.
New Rules Help Consumers
The three main credit bureaus added a new 365-day grace period before medical debts that haven’t been paid show up on your credit report in 2022. This gives patients time to resolve billing issues.
The credit bureaus also agreed to remove all medical collections under $500 from credit reports starting in 2023. These positive changes will help prevent consumers’ credit scores from being damaged by small medical debts.
The Debt Doesn’t Completely Vanish
However, once the debt ages past the credit reporting time limit and the statute of limitations, it becomes easier to manage. It won’t hurt your credit score or credit access anymore. You also can no longer be sued for the debt.
Strategies for Handling Medical Debt
Rather than waiting seven years for medical debt to disappear from your credit report, it’s wise to be proactive. Here are some tips for dealing with medical debt:
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Negotiate with the hospital or collection agency for a reduced payment plan. Often you can settle medical bills for less than the original amount.
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If uninsured, ask the hospital about financial assistance programs or charity care to reduce or eliminate what you owe.
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Consider getting a medical credit card or personal loan to pay off the debt in full and avoid collections. This prevents credit damage.
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Consult a medical billing advocate to review your charges and insurance claims to spot errors and negotiate on your behalf.
While medical debt can feel overwhelming, being proactive goes a long way. With the right moves, you can reduce balances and avoid having unpaid medical bills hurt your finances.
Different Rules for Each Contract Type
The statute of limitations on your debt is defined largely by the type of contract governing the debt. Oral contracts have a different statute than written contracts, promissory notes, and open-ended contracts. What does that mean?.
- Oral contracts are verbal agreements you make to repay money. One example of this is when a friend agrees to lend you money but doesn’t write it down.
- Written contracts are papers that you sign that spell out the terms and conditions. These are the types of loans that most people get, like car loans, personal loans, and mortgages. Medical debt does too. Before getting medical care, you will almost always be asked to sign papers saying you will pay back any bills that aren’t covered by insurance.
- Promissory notes are a type of lighter written contract. They are an agreement between two people that spells out the terms of repayment and interest.
- Similar to credit cards, open-ended contracts let you borrow money and pay it back over and over again.
Again, each state has their own statute of limitations for each kind of debt. Find the statute of limitations for your state.
What’s a Statute of Limitations
The statute of limitations tells creditors how long they have to go to court if you don’t pay them. If you owe money to a hospital or other health care provider, the amount of time they have to sue you for this debt depends largely on the laws of the state where the contract was created.
Crucially, the statute of limitations varies for each state and for each type of debt.
Read more: Understanding the Statutes of Limitations on Debt
After 7 Years What Happens To Debt
FAQ
How long until medical debt is forgiven?
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.
What happens after 7 years of not paying debt?
After 7 years of not paying debt, the negative information related to that debt will be removed from your credit report. However, the debt itself doesn’t disappear; .
Does medical debt drop off after 7 years?
It takes seven years for medical debt to disappear from your credit report. And even then, the debt never actually goes away. If you’ve had a recent hospital stay or an unpleasant visit to your doctor, worrying about the credit bureaus is likely the last thing you want to do.
Do I have to pay a debt that is over 7 years old?
You’re not obligated to pay, though, and in most cases, time-barred debts no longer appear on your credit report, as credit reporting agencies generally drop unpaid debts after seven years from the date of the original delinquency.