Medical debt has long been a financial burden that extends beyond unpaid bills—it has damaged credit scores, making it harder for people to secure loans, housing, and jobs. But a new California law, taking effect in 2025, will change that by prohibiting medical debt from being reported to credit agencies.
This landmark law recognizes that medical debt is not a reflection of financial irresponsibility but rather a symptom of a broken healthcare system. As compassionate bankruptcy attorneys, we see the impact of medical bills on hardworking people, and this new law is a major step toward fairness.
Why This Matters
Medical debt is not like credit card or personal loan debt—people don’t choose it. It often results from emergencies or insurance gaps. Despite this, unpaid bills have long impacted credit scores, making financial recovery harder. This law:
🔹 Protects Families – Ensures low-income and middle-class Californians aren’t penalized for medical hardships.
🔹 Recognizes Medical Debt as Different – Acknowledges that healthcare costs shouldn’t be used to judge financial reliability.
🔹 Improves Access to Housing & Loans – Helps renters and homebuyers secure housing without medical debt holding them back.
🔹 Encourages Fair Lending – Lenders will now evaluate borrowers based on true financial behavior, not unexpected medical expenses.
What This Law Doesn’t Do
While this law removes medical debt from credit reports, it does not erase the debt itself. Bills must still be paid, and debt collectors may still try to collect. If medical debt remains overwhelming, bankruptcy is a powerful tool to eliminate it entirely. Bankruptcy will help protect your assets, your home equity, retirement, and possibly your emergency savings fund.
What Should You Do If You Have Medical Debt?
✔ Check Your Credit Report – Even after this law takes effect, ensure old debts are removed.
✔ Negotiate with Medical Providers – Many hospitals offer payment plans or financial aid.
✔ Consider Bankruptcy – Medical bills are fully dischargeable in bankruptcy, meaning they can be eliminated under Chapter 7 or restructured under Chapter 13.
✔ Know Your Rights – Debt collectors can’t report medical debt, but they may still attempt to collect. Understanding your legal protections is key.
A More Just Financial Future
This law is a major victory for consumers, ensuring that getting sick does not ruin your credit. No one should be financially punished for needing medical care. If you are struggling with debt, we are here to help. Contact us for a free, compassionate consultation and take control of your financial future today.
Our mission as bankruptcy attorneys is to provide guidance, dignity, and support to those facing financial distress. If you or a loved one are struggling with debt, know that there is a path forward, and we are here to help. Call (844)894-4440 to schedule an appointment with Jenny L. Doling. She has handled more than 7,000 cases over the past 25 years, and she personally meets with each client.
Author: Jenny L. Doling, Esq., LLM Taxation
CA State Bar Certified Bankruptcy Specialist
Secretary and Board of Director of NACBA
President of the San Diego Bankruptcy Forum
Serving Bankruptcy Clients throughout California and
Tax Clients Nationally