Plan proposed to erase medical debt from credit reports

RAPID CITY, S.D. (KEVN) - The Consumer Financial Protection Bureau says 15 million people have a total of $49 billion dollars in outstanding medical bills in collection. The federal agency is planning a rule that would remove medical bills from credit reports.

This proposed rule by the CFPB would prevent lenders from making decisions on whether someone can qualify to rent, buy a car, or take out a mortgage based on medical information.

The CFPB believes medical debt can be a bad predictor of whether someone is likely to repay a loan because they are usually not planned.

Rapid City bankruptcy attorney Mitch Johnson said most of the clients he sees seeking his services are because of substantial medical debt. This could be due to having no insurance or because of a major medical emergency.

Johnson added that collection agencies in the community are very aggressive and the best way to get a fresh start can be to file for bankruptcy.

”At the end of the process they get a fresh start, those debts go away, any money judgments that have been obtained will also be discharged after the courts, federal bankruptcy courts, discharge order. We always apply through the circuit courts in the small claims courts to discharge those judgments,” Johnson said.

Plans for this rule are in place for September and it is expected to be finalized early next year.

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