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How proposed Medical Debt Relief Act could help consumers

Debts from small credit card purchases, mortgages and student loans are different from those accrued because of medical events, which are seldom planned and often arrive with enormous costs that may or may not be covered by health insurance. Even if a person's medical debt is not insurmountable and does not lead to bankruptcy, it can still affect a person's credit score.

As most Tennessee residents know, failing to settle debts, regardless of their origin, will negatively affect an individual's credit rating. Unfortunately, even when medical debts have been paid off, any initial poor credit rating that followed the debt can be problematic for an individual for years. A bad credit score limits a person's ability to borrow money at lower interest rates or purchase a car or house, and could affect many employment opportunities.

Various advocacy groups have been pushing Congress to enact the Medical Debt Relief Act, which requires that any history of medical debts below $2,500 be erased from a consumer's credit score 45 days after debt settlement. According to credit evaluators, medical debts are subject to considerable dispute and affect both insured and uninsured individuals.

To those who are dealing with huge medical debts, one effective way to find debt relief is through bankruptcy. This procedure protects consumers from foreclosure, creditor harassment and wage and bank account garnishment.

Furthermore, debtors can benefit from bankruptcy because it offers a fresh financial start. Debtors may choose from Chapter 7, which is liquidation, and Chapter 13, which is a reorganization. The right choice will depend on the debtor's situation. The goal of bankruptcy is for consumers to gain a firm financial footing by settling their debts. Once all the debts are discharged, the consumer can start over debt free.

Source:, "Medical Debt Relief Act impasse hindering homeownership?," Robert Ottone, Oct. 14, 2013

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
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