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How long will paid medical debt in collections count against me?

Michigan residents may be aware of reports stating that the majority of bankruptcy filings stem from medical debts. In many cases, medical debt is brought about by emergencies such as car accidents and/or unanticipated and unavoidable surgical procedures. When those medical debts are handed over for collections, many people work very hard at getting them paid off over time. However, realizing that the record of the debts in collections will remain on your credit history -- even if settled in full -- may be demoralizing.

Unfortunately, there is not much to be done in order to clear that debt off your record. Bad debt typically has an adverse effect on your credit score, making it almost impossible to obtain financing, loans or mortgages. Even if a loan application is successful, the interest rates may be extremely high. Some reprieve was recently announced by the Fair Isaac Corporation. Its new credit score system -- FICO 9 -- will no longer penalize consumers whose unpaid debt consists mainly of medical debts.

However, not all lenders will implement the new credit score system immediately. While your credit score may rise by at least 25 points, some lenders may still scrutinize your credit history. The bad medical debt will, unfortunately, remain on your history for seven years and will, therefore, affect your credit worthiness for some time.

Michigan consumers who are in a situation where it is impossible to make ends meet due to overwhelming medical debt may benefit from researching the different bankruptcy options and the protection each one offers. Even more valuable may be the services of an experienced bankruptcy attorney. With proper guidance and support, such a professional may be able to put you on the road to financial stability with enough time to rebuild a good credit score.

Source: Forbes, "How Can I Get Medical Bills In Collections Off My Credit Report?", Christina LaMontagne, Oct. 20, 2014

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