The Consumer Financial Protection Bureau has enacted a significant rule that bans medical debt from appearing on credit reports, effective January 7, 2025. This change is expected to raise the average credit score of individuals with medical debt by approximately 20 points. While this rule may facilitate easier access to mortgages and loans, it does not eliminate the underlying medical debt, which borrowers are still legally obligated to repay. In residential real estate, potential homeowners should remain cautious about their overall financial situation, ensuring they can afford monthly payments without becoming "house rich but cash poor." For commercial real estate and small businesses, the new rule may ease the path to securing leases and loans, as personal credit scores will improve without the burden of medical debt. However, bankruptcy practitioners warn that the absence of medical debt on credit reports could complicate the bankruptcy filing process. Estate planning also remains crucial, as medical debts still need to be accounted for when managing an estate.
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