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 be a huge burden on people’s finances and credit scores. A common belief is that medical debt magically vanishes after seven years. But is this really true? Let’s take a deeper look at what happens to unpaid medical bills 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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Judgments stay on your report for seven years or until your state’s statute of limitations runs out, whichever is longer.
So judgments related to medical debt could stick around beyond seven years if your state’s statute of limitations is longer.
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
In 2022, the three major credit bureaus implemented a new 365-day grace period before unpaid medical collections appear on your credit report. 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. An example of this would be a friend agreeing to lend you money, but not putting anything in writing.
- Written contracts are documents you sign that include terms and conditions. Most loans like car loans, personal loans, and mortgages fall into this category. So does medical debt – you will almost always be asked to sign paperwork agreeing to repay any expenses accrued (and not covered by insurance) prior to receiving medical care.
- Promissory notes are a lighter written contract, an agreement between two people with the repayment terms and interest spelled out.
- Open-ended contracts have a revolving balance that you can repay and borrow again, like credit cards.
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
A statute of limitations is the amount of time a creditor has to take legal action against you for non-payment. 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?
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.