Medical debt is being forgiven through targeted, state-led, and non-profit initiatives rather than a universal federal program. Programs in states like AZ, IL, and NC, along with nonprofits like Undue Medical Debt, have erased billions in debt. Key efforts include, hospital charity care, and buying debt for pennies on the dollar.
"California banned medical debt from appearing on credit reports because we recognized this practice as harmful to struggling consumers and not helpful in determining creditworthiness. Let me be clear: This remains the law in California.
About the debt relief program
Public Health partnered with the non-profit organization Undue Medical Debt to implement the program. Residents started to receive letters to say their debt was canceled in May 2025 and, as of December 2025, over $363 million of medical debt has been erased for over 171,000 residents.
Introduced in House (07/29/2025) To amend the Fair Credit Reporting Act to prohibit the inclusion of medical debt on a consumer report, and for other purposes.
In June 2024, the CFPB finalized a rule to eliminate all medical debt from most credit reports and ban lenders from using medical debt collection information to make underwriting decisions.
The rule removes a financial information exception for medical accounts and adds a restriction that forbids consumer reporting agencies from supplying medical account information to creditors when they determine a person's ability to take on new debt or expand existing obligations.
5 Useful Tips to Help You Erase Medical Debt
If you don't pay medical bills in 2025, they can still go to collections, damage your credit (though new rules aim to help), incur fees/interest, and potentially lead to lawsuits, liens, or wage garnishment, but you can often negotiate payment plans or seek financial assistance to resolve them, with options like California's new law (SB 1061) preventing some reporting.
Your options may include: Charity care. If you still need help with medical bills after using health insurance or Medicaid payments, a charity care program may assist you with the remaining costs. In most cases, you can apply for charity care through a doctor or hospital where you are seeking medical treatment.
By hospital or provider write-offs
Some providers write off uncollected bills after a certain period has passed, typically when they determine the patient cannot or will not pay. This is largely an accounting action, though, and the debt may still be assigned to collections.
The 15 states that ban medical debt from appearing on credit reports are: California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia and Washington.
Starting Jan. 1, a new state law will prohibit health providers and debt collectors from reporting medical debt information to credit agencies. That means unpaid medical bills should no longer show up on people's credit reports, which consumer advocacy groups say is a boon for patients with debt.
Yes, you should worry about medical bills in collections because they can hurt your credit, but you have rights, and there are steps to take, including verifying the debt, negotiating, exploring financial assistance (like hospital charity care or government programs), and understanding recent changes where paid medical debt and bills under $500 are removed from credit reports. Ignoring them is risky, as they can still impact loans, housing, and even jobs.
The Worst Kinds of Debt to Have
Debts resulting from fraud, theft, or embezzlement. Court-ordered fines, penalties, or restitution. Most tax debts (some older tax debts may be dischargeable). Debts that were not listed in your bankruptcy petition (unless the creditor learns of your bankruptcy case).
To write off debt you need to prove you are unable to pay what you owe. There are debt solutions that can do this for you. And, in some cases, the people you owe may agree to write off some, or all, of your debt. This may be through making a settlement offer.
The 7-in-7 rule (or 7x7 rule) in debt collection, part of the CFPB's Regulation F , limits how often debt collectors can call a consumer about a specific debt: they cannot call more than seven times within seven consecutive days, nor can they call again within seven days of a conversation about that debt, preventing harassment and abusive practices, though these are rebuttable presumptions of compliance.
Small balances are ignored
If you owe as much as $499 and it gets sent to collections and you never, ever pay, it still won't have any impact on your credit score. Note that $500 is the upper limit for any one specific medical debt, not a total debt threshold.
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If you don't pay medical bills in the U.S., they often go to collections, hurt your credit score, and can lead to lawsuits, wage garnishment, or liens on property, though many providers offer payment plans or financial aid; contacting your provider early is key to avoiding severe consequences like aggressive collection and legal action.