Medical Debt Protections
Medical debt is the leading cause of personal bankruptcy in the United States, with approximately 100 million Americans carrying some form of medical debt and an estimated $220 billion in total medical debt outstanding — much of it owed by people who have health insurance but couldn't cover deductibles, copays, and out-of-network costs. Federal law has no single statute specifically governing medical debt, but a convergence of rules — the No Surprises Act (42 U.S.C. § 300gg-111), bankruptcy protections (11 U.S.C. §§ 362, 507, 523), fair credit reporting rules (15 U.S.C. § 1681c), and CFPB rulemaking — has significantly expanded protections for patients in recent years. The most consequential 2025 change: the CFPB's medical debt credit reporting rule (finalized January 2025) removed medical debt from credit reports entirely, estimating that 15 million Americans would see improved credit scores as a result — though the rule faced legal challenges and potential rollback under the new administration. The No Surprises Act (effective January 2022) protects patients from unexpected out-of-network bills for emergency care and certain scheduled procedures, with independent dispute resolution between insurers and providers replacing the burden on patients. Separately, nonprofit hospitals (which receive tax exemptions in exchange for charity care obligations) must maintain financial assistance policies and are barred from extraordinary collection actions — including credit reporting — against patients who may qualify for charity care, under IRS rules codified at 26 U.S.C. § 501(r).
Current Law (2026)
Medical debt protections have expanded significantly through credit reporting changes, CFPB rulemaking, and state legislation.
| Protection | Status |
|---|---|
| Medical debt under $500 | Excluded from credit reports |
| Paid medical debt | Excluded from credit reports |
| Medical debt reporting delay | 1-year waiting period before reporting |
| VA medical debt | Excluded from credit reports |
| No Surprises Act | Protects against out-of-network surprise bills |
| Nonprofit hospital charity care | Required for tax-exempt hospitals |
Legal Authority
- No Surprises Act (2022) — 42 USC Section 300gg-111 et seq.
- IRC Section 501(r) — Nonprofit hospital community benefit requirements
- CFPB medical debt rulemaking — Credit reporting restrictions
- FCRA amendments — Credit bureau reporting requirements
- 11 U.S.C. § 523(a) — Medical debt is NOT listed as an exception to discharge, making it fully dischargeable in bankruptcy (unlike student loans, taxes, and child support which survive discharge)
- 11 U.S.C. § 362(a) — Automatic stay upon bankruptcy filing halts all medical debt collection actions, lawsuits, wage garnishments, and bank levies; violators face actual damages, attorney fees, and potential punitive damages under § 362(k)
- 11 U.S.C. § 507(a)(5) — Priority for contributions to employee benefit plans (including medical benefits) owed within 180 days before filing, up to statutory cap per employee
- 15 U.S.C. § 1681c — Requirements relating to information contained in consumer reports (FCRA provisions governing medical debt reporting; restrictions on inclusion of paid medical debt, medical debt under $500, and timing of medical debt reporting on consumer reports)
How It Works
Three distinct layers of protection now cover medical debt. The first is credit reporting: the three major bureaus (Equifax, Experian, TransUnion) voluntarily committed in 2022–2023 to exclude paid medical debt from reports, exclude any medical debt under $500, and impose a 1-year waiting period before any medical debt can appear — giving patients time to resolve billing disputes and apply for financial assistance before their credit is affected. Under 15 U.S.C. § 1681c, these restrictions are codified in credit reporting requirements. The CFPB under the Biden administration finalized a more sweeping rule in late 2024 to remove all medical debt from credit reports entirely; the Trump CFPB paused implementation, and the rule's final status remains uncertain. What remains in force are the voluntary bureau commitments and the existing statutory provisions.
The No Surprises Act (42 U.S.C. § 300gg-111), effective January 2022, protects insured patients from out-of-network bills for emergency services, air ambulance, and non-emergency services at in-network facilities where the patient didn't choose out-of-network care. Patients owe only their in-network cost-sharing amount — the same deductible and copay they'd owe if the provider were in-network. The provider and insurer resolve the difference through an Independent Dispute Resolution (IDR) process that the patient is not involved in. Nonprofit hospitals that receive tax-exempt status under 26 U.S.C. § 501(r) must maintain written financial assistance policies, limit charges to patients who qualify for assistance (typically below 200–400% FPL) to amounts no higher than what they charge insured patients, and make reasonable efforts to determine charity care eligibility before initiating extraordinary collection actions — including credit reporting and lawsuits.
Bankruptcy remains the most complete medical debt remedy: under 11 U.S.C. § 523(a), medical debt is not listed as an exception to discharge — unlike student loans, taxes, domestic support, or certain criminal fines, medical debt is fully dischargeable in Chapter 7 liquidation. The automatic stay under § 362 immediately halts all collection activity, lawsuits, garnishments, and bank levies upon filing; willful violations by collectors after the stay is imposed can result in actual damages, attorney fees, and punitive damages under § 362(k). Chapter 13 repayment plans can also address medical debt by treating it as general unsecured debt — often paying only cents on the dollar over a 3–5 year plan, with the remainder discharged at plan completion.
How It Affects You
If you have a medical bill you can't pay right now: Don't panic, and don't rush to pay. Medical debt under $500 is excluded from credit reports entirely. Any medical debt — regardless of amount — can't be reported for at least one year from the date of service. That grace period is real: use it to request an itemized bill (billing errors are common, especially for hospital stays), apply for the hospital's financial assistance program, and negotiate the balance before putting anything on a credit card. Paying a medical bill with a credit card converts it into credit card debt that does affect your credit immediately and carries interest.
If you received care at a nonprofit hospital: Ask explicitly about charity care. Under the Affordable Care Act's Section 501(r) rules, nonprofit hospitals must have a Financial Assistance Policy (FAP) and must make it available to patients. Many hospitals extend free or significantly discounted care to households earning up to 200–400% of FPL — sometimes retroactively even after a bill has been sent to collections. Call the hospital's billing department and ask: "Do you have a financial assistance or charity care program, and can I apply retroactively?" Many patients who could have had their bills zeroed out never ask.
If you received a surprise out-of-network bill for emergency care: The No Surprises Act protects you. For emergency services and certain non-emergency services at in-network facilities, you owe only your in-network cost-sharing — the same copay or deductible you'd owe for an in-network provider, even if the treating physician was out of network. If you received a bill above that amount, you can dispute it. File a complaint at cms.gov/nosurprises or call 1-800-985-3059. The provider and your insurer go through an independent dispute resolution process — you're not involved in that negotiation.
If a medical collector contacts you: Know your rights under the Fair Debt Collection Practices Act. Collectors must stop contacting you if you send a written cease-communication request (they can still sue, but calls stop). More practically: medical bills are highly negotiable. Hospitals and collectors frequently accept 30–60 cents on the dollar for lump-sum settlements, especially for balances over $1,000. Getting a negotiated settlement in writing before paying is essential — verbal agreements to reduce balances aren't enforceable.
When medical debt is forgiven by a provider or collector, the tax implications are governed by debt forgiveness taxation rules — though insolvency exceptions often shield patients from taxable income.
State Variations
Many states have enacted additional medical debt protections:
- CA (SB 1061): Nonprofit hospitals must screen for financial assistance eligibility before billing, limit patient charges, and restrict collection actions
- CO: Medical debt cannot be reported to credit bureaus
- NY: Comprehensive surprise billing protections pre-dating federal law
- NM: Prohibits medical debt interest above 4%
- Several states: Have their own surprise billing/balance billing protections that may be stronger than federal law
Implementing Regulations
- 12 CFR Part 1022 — CFPB Fair Credit Reporting (Regulation V) (medical debt reporting restrictions, prohibition on medical debt in credit reports under recent CFPB rule)
- 16 CFR Part 318 — Health breach notification rule (FTC notification requirements for health data breaches)
Pending Legislation
- HR 4827 (Rep. Williams, D-GA) / S 2519 (Sen. Merkley, D-OR) — Medical Debt Relief Act of 2025: bar medical debt from credit reports and credit decisions; require CFPB to issue implementing rules within one year. Status: Introduced.
- SJRES 141 — Disapprove CFPB's withdrawal of Regulation F protections on deceptive and unfair medical debt collection. Status: Introduced.
- SJRES 148 — Disapprove CFPB's withdrawal of Bulletin 2022-01 medical-debt collection and reporting requirements tied to the No Surprises Act. Status: Introduced.
- CFPB final rule: Complete elimination of medical debt from credit reports (proposed, not yet finalized).
- State charity care expansion: Multiple states considering stronger charity care requirements.
- Medical debt bankruptcy: Proposals for simplified bankruptcy discharge of primarily medical debt.
Recent Developments
- CFPB medical debt rule reversal (2025): The CFPB under the Biden administration finalized a rule in late 2024 to remove all medical debt from credit reports. However, the Trump administration's CFPB leadership withdrew or paused implementation of several consumer protection bulletins related to medical debt collection and No Surprises Act enforcement in early 2025. Congressional disapproval resolutions (SJRES 141, SJRES 148) have been introduced to challenge these withdrawals. The status of the comprehensive medical debt credit reporting ban remains uncertain.
- Credit bureau voluntary changes hold: The three major credit bureaus' voluntary changes from 2022-2023 remain in effect: no reporting of paid medical debt, no reporting of medical debt under $500, and a 1-year waiting period before any medical debt appears. These are industry commitments, not regulatory requirements, and could theoretically be reversed — but public pressure makes reversal unlikely.
- No Surprises Act IDR backlog: The Independent Dispute Resolution (IDR) process for surprise billing disputes has been overwhelmed, with hundreds of thousands of cases pending. Processing delays mean some patients remain in billing limbo for months. Courts have struck down portions of the IDR implementation rules, and the agencies continue to revise the process.
- State-level action accelerating: With federal rulemaking uncertain, states are filling the gap. Colorado, New York, and Oregon enacted additional medical debt protections in 2024-2025. Several more states are considering laws to ban medical debt from credit reports at the state level, independent of federal action.