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Chapter 7 bankruptcy and medical debt

For millions of Americans, medical debt poses a serious financial issue. An unexpected illness or injury can throw an individual or family into serious financial turmoil, and the result can be damaged credit, increased stress and the inability to attain new lines of credit. The issue has received widespread attention, from various consumer advocacy groups all the way up to the Unites States government. While reforms are underway in the way that medical debt is handled, Chapter 7 bankruptcy remains one of the most powerful tools for Ohio families facing this type of debt.

A recent study by the Consumer Financial Protection Bureau found that debt reporting companies were not properly handling medical debt. This is partly to blame for the fact that as many as one in five consumers has at least one medical debt account listed on their credit report. Six months after the completion of that study, the federal government came to an agreement with one medical debt collecting firm. As a result, more than 23,000 people will receive between $100 and $1,000 from an agreed-upon $5.4 million restitution plan.

Recent changes in how medical debt is reported are widely viewed as a win. Credit reporting bureaus now consider medical debt in a different light than other forms of debt, and the presence of a medical account on one's credit report will not have the same impact as other types of unsecured debt. In addition, the major credit reporting agencies have agreed to hold off on reporting medical debts until they have reached 180 days past due.

While these reforms are certainly promising, they do little to relieve the serious financial strain facing those in Ohio who are already facing high levels of medical debt. For many, repayment is simply not a viable option. In such cases, Chapter 7 bankruptcy remains a powerful tool in eliminating medical debt and regaining financial stability.

Source:, "Medical debt collectors could now owe you", Kathy Kristof, June 22, 2015

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