Does Medical Debt Really Go Away After Seven Years

Does Medical Debt Really Go Away After Seven Years Does Medical Debt Really Go Away After Seven Years? Does Medical Debt Really Go Away After Seven Years?Like all urban myths, the seven-year rule does contain a small kernel of truth. But sorry, folks, its just not that easy.Here on the OppLoans Financial Sense Blog, weve written about all kinds of debt. Payday loan debt. Student debt. Blood debts. (Okay, maybe not that last one.) And while there are always going to be some differences between the ways different kinds of debt are handled, for the most part, its all pretty much the same.But recently one of our writers shared a story regarding medical debt that had us a little bit floored. We decided to let her tell it firsthand. She writes:I was scrolling on Facebook a few months ago when a post from a friend whod been having medical issues caught my eye. She was uninsured and had for the past few months been dealing with  a chronic illness that left her in and out of the emergency room on a weekly basis. The post was a photo of her latest hospital bill, a whopping $60,000 charge she ha d absolutely no way to pay.File this under things Ill be ignoring for the rest of my life,' she wrote, ending with a laugh-cry emoji that  seemed to perfectly encapsulate the futility of her situation. In the comments below, dozens friends and family expressed shock and sympathy for her plight, and I noticed a theme. Many of the commenters seemed to think that she didnt NEED to pay off those bills.Dont worry about it, wrote one man. Medical debt disappears after seven years. Youll have bad credit until then but after the seven-year mark youll be home free!This comment had several likes and affirmations under it. I sat there staring at it for a few moments, wondering why  this idea seemed to  have so much consensus behind it. It couldnt possibly be true, right? Why even bill anyone for medical services if theyre not actually required to pay  that balance off?Weird, right?Well, spurred by the popularity of this strange belief, we did some research. Unfortunately for our coworkers frie nd, and all the fervent believers in the seven-year rule, its not quite that simple. HoweverThe seven-year figure  DOES come from somewhereThe belief that medical debt will magically disappear after seven years might not be entirely accurate,  but there are actually laws in place that limit the amount of time that any unpaid bill can stay on your credit report.According to provisions in the Fair Credit Reporting Act,  most accounts that go into collection can only be reported on your credit report for up to seven years. After that, they cant negatively affect your credit score and shove potential lenders and landlords towards the door.There are, of course, some exceptions to this rule. Chapter 7 bankruptcy filings stay on your credit report for 10 years. Judgments stay either seven years or until the statute of limitations in your state is up, whichever is longer. Unpaid student debt? That will stay on your credit report for-ev-er.But medical debt wont! While unpaid medical bills wi ll come off your credit report after seven years, youre still legally responsible for them. Taking those debts off your report just means they will no longer be held against you when you apply for a loan, an apartment, or a job, which is definitely a good thing.Theres also a six-month  buffer period during which new medical debt cannot appear on your reportAdditionally, a new law went into effect in September 2017 states requires the three major credit bureausâ€"Equifax, Experian and TransUnionâ€"to now give patients a 180-day grace period to resolve their medical debt before it shows up on their credit reports.According to a report from the Consumer Financial Protection Bureau, one out of five credit reports contain unpaid medical debt, and per Experian, the six-month rule was, designed to help people with a common dilemmaâ€"the need for time to make necessary payments or finalize issues with insurers. Once a medical debt gets paid, check that the listed account is removed from you r credit report. If an account is 180 days old and unpaid, it will be added to a consumers credit file.Under the current system, consumers can find themselves trapped in limbo, stuck with bills while waiting for their healthcare provider to reimburse them for approved expenses. During this period, any gathered debts that are left unpaid can hurt their credit scores, wrote Matt Tatham on the Experian blog back in August.State-by-state  statutes of limitations on debt collection may also fuel the seven-year mythMany states have laws on the books that limit the amount of time that a debt is enforceable or the amount of time that collectors, lenders, or creditors have to use the court system to legally force you to pay for a debt.Different categories of debt have different limits, but in general, most debt falls into these four categories:Oral Agreement:  A debt agreement made verbally with  no written documentation.Written Contract:  A debt agreement made in writing and signed by both parties. Medical debt is a written contract.Promissory Note:  A debt agreement made in writing and signed by both parties which includes a deadline for payback and information on the interest rate. Most mortgages and student loans are promissory notes.An Open-Ended Agreement:  A debt agreement made in writing on an account with a revolving balance. Credit cards are open-ended agreements.Statute of Limitations by State (via The Balance)StateOralWrittenPromissoryOpenAlabama6 years6 years6 years3 yearsAlaska6 years6 years3 years3 yearsArizona3 years6 years6 years3 yearsArkansas6 years6 years3 years3 yearsCalifornia2 years4 years4 years4 yearsColorado6 years6 years6 years6 yearsConnecticut3 years6 years6 years3 yearsDelaware3 years3 years3 years4 yearsFlorida4 years5 years5 years4 yearsGeorgia4 years6 years6 years4 yearsHawaii6 years6 years6 years6 yearsIdaho4 years5 years5 years4 yearsIllinois5 years10 years10 years5 yearsIndiana6 years10 years10 years6 yearsIowa5 years10 years5 years5 yearsKansas3 years6 years5 years3 yearsKentucky5 years15 years15 years5 yearsLouisiana10 years10 years10 years3 yearsMaine6 years6 years6 years6 yearsMaryland3 years3 years6 years3 yearsMassachusetts6 years6 years6 years6 yearsMichigan6 years6 years6 years6 yearsMinnesota6 years6 years6 years6 yearsMississippi3 years3 years3 years3 yearsMissouri5 years10 years10 years5 yearsMontana5 years8 years8 years5 yearsNebraska4 years5 years5 years4 yearsNevada4 years6 years3 years4 yearsNew Hampshire3 years3 years6 years3 yearsNew Jersey6 years6 years6 years6 yearsNew Mexico4 years6 years6 years4 yearsNew York6 years6 years6 years6 yearsNorth Carolina3 years3 years5 years3 yearsNorth Dakota6 years6 years6 years6 yearsOhio6 years15 years15 years6 yearsOklahoma3 years5 years5 years3 yearsOregon6 years6 years6 years6 yearsPennsylvania4 years4 years4 years4 yearsRhode Island15 years15 years10 years10 yearsSouth Carolina3 years3 years3 years3 yearsSouth Dakota3 years6 years6 years6 yearsTennessee 6 years6 years6 years6 yearsTexas4 years4 years4 years4 yearsUtah4 years6 years6 years4 yearsVermont6 years6 years5 years3 yearsVirginia3 years5 years6 years3 yearsWashington3 years6 years6 years3 yearsWest Virginia5 years10 years6 years5 yearsWisconsin6 years6 years10 years6 yearsWyoming8 years10 years10 years8 yearsIn general, the statute of limitations  on debt collection starts from the last payment you make. Many debt collectors will continue to call and try an enforce collection even after the statute is up because they know most people arent aware of their rights under these laws.Its important to note, however, that just because you cant be legally sued to pay up after the statute of limitations expires, that doesnt mean the debt no longer exists.  Its still there, and its still your responsibility. Creditors  can try to take you to court over the debt, but if you can prove the statute of limitations has passed, they wont win their lawsuit against you.So can you just ignore m edical debt until it stops affecting your life?In theory, sure. If you can deal with years of bad credit and harassing phone calls, and if you can somehow avoid getting sued for your debt before the statute of limitations on your medical debt is up, you may reach a point about a decade in the future where youre no longer hounded every day about paying off those old hospital bills. But its never going to truly disappear.If you dont want to deal with years of hassle, you might want to try and work  something out directly with the hospital.  After all, a hospital is a business, and they need people to pay their bills so they can, in turn, pay their staff, buy new medicine and equipment, and keep helping people recover from illnesses and injuries. Most hospitals will be willing to work with you to reduce your debt or make a settlement payment at a fraction of the cost.It is absolutely possible to negotiate a medical bill, said John Barnes, a certified financial planner and owner of My F amily Life Insurance  (@MyFamilyLifeIns), in a recent OppLoans eBook on managing medical debt.I generally don’t recommend negotiating small bills such as copays, but when your out-of-pocket costs start in the hundreds, then it may make sense.  It is as simple as asking the hospital or doctor’s office if they have a cash payment policy. This can be a starting point. You can also propose a discount to them as well. Let’s say the bill is $500. You can say, All I can pay is $300. Is that acceptable to you? While some may push back, most won’t.To learn more about dealing with medical expenses, check out these related posts and articles from OppLoans:How to Manage a Medical Emergency Without Going BankruptWant to Avoid No Credit Check Loans? Build an Emergency Fund4 Tips for Managing Your Mental Health Care on a BudgetHave you encountered the seven-year myth before? Let us know!  You can  email us  or you can find us on  Facebook  and  Twitter.