Arkansas residents may be relieved to hear that medical debt will no longer have as large a negative impact on their credit ratings, but this type of debt is still a huge problem for many people. According to the Kaiser Family Foundation, one-third of Americans struggle to pay medical bills, and a study published in the The American Journal of Medicine in 2009 states that the leading reason that people file for bankruptcy is medical debt.
Unpaid medical bills can prevent people from accessing other types of credit, including car loans and credit cards. However, the impact of medical debt is likely to be reduced as a result of a change to the way that FICO scores are calculated, and it is estimated that individuals with medical debt but an otherwise good history of debt repayment will see scores rise by an average of 25 points.
The changes will eliminate the effect of past unpaid medical debts, and current unpaid debts will have a reduced impact on credit scores. According to FICO's director of public relations, many people have medical debt, but it does not usually prove to be an indication that these individuals are less likely to pay other debts.
Whether someone has enormous debts due to credit cards, medical bills or other types of debt, filing for bankruptcy may allow them to eliminate or reorganize their debt. Filing for bankruptcy may enable people to regain control of their finances, and a lawyer who has experience in this area can help clients understand what type of filing they qualify for as well as assist them with the bankruptcy process.
Source: Forbes, "Medical Debts Will Soon Weigh Less On Your Credit Score, But They're Still A Problem", Christina LaMontagne, August 26, 2014