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Medical Debt, Bankruptcy and Your Credit Score

Medical debt is one of the leading causes of bankruptcy in the U.S. One 2009 Harvard study found that 62 percent of all personal bankruptcies were filed because of medical problems. Medical debt causes issues even for those who are insured: nearly 80 percent of filers had insurance at the beginning of their medical problems.

In the study, families bankrupt from medical debt reported almost $18,000 in out-of-pocket medical expenses, and uninsured families reported nearly $27,000.

Reporting Medical Debts

Unlike other types of consumer debt, outstanding balances for medical services are rarely reported to credit agencies, at least at first. Medical providers will usually attempt to collect on unpaid services for months after the due date without reporting the debt to credit agencies. On the other hand, medical providers are also usually unwilling to provide credit or payment plans. Medical providers are not debt collectors and usually don’t behave as such.

Still, after several collection attempts, a medical service provider will assign the debt to a third-party debt collector. This collector will almost certainly report the debt to a credit agency, which will negatively impact the person’s credit score. Credit agencies do not distinguish between medical debt and other debt, such as credit card debt, when lowering a person’s credit score.


Like other unsecured debt, outstanding medical bills are dischargeable through bankruptcy. Dischargeable debt is debt that is forgiven after the bankruptcy process is complete. Unsecured debt includes credit card balances, unsecured personal loans, medical debt and utility bills.

A common misconception is that bankruptcy will destroy the filer’s credit score. While it is true bankruptcy will stay on a credit report for several years after the filing, getting out from under unpaid debt can ultimately be less harmful than having outstanding unpaid bills, collection activity, lawsuits and judgments. In addition in many cases the rebuilding of credit may occur more quickly than one would expect. Whether dealing with debt through a Chapter 7 liquidation bankruptcy or a Chapter 13 payment plan , a debtor can get out of an unmanageable financial situation and begin to rebuild credit.

If you have outstanding debt, medical or otherwise, contact an experienced bankruptcy attorney to discuss your legal options and whether bankruptcy is right for you.