10/29/2025
Interesting new law… What’s your opinion?
Delaware has enacted a new law that prohibits medical debt from being reported to consumer credit agencies or appearing on credit reports. Unpaid medical bills cannot be used in decisions involving credit, housing, or employment, separating medical expenses from a person’s financial reputation.
While the law itself does not erase medical debt, Delaware has launched a separate debt forgiveness initiative funded by taxpayers. The state allocated $500,000 to partner with the nonprofit Undue Medical Debt, which purchases and cancels delinquent medical accounts at a steep discount.
To qualify for debt forgiveness, residents must have a household income at or below 400% of the federal poverty level or carry medical debt equal to 5% or more of their annual income. The process does not require applications; qualifying residents will receive notification if their debt has been purchased and cleared.
Hospitals and debt collectors that sell these accounts are compensated by the nonprofit but may still benefit from existing financial provisions. Medical providers often classify unpaid accounts as bad debt or charity care, allowing them to claim tax deductions or community-benefit credits. When they sell the debt portfolios at a reduced price, they can record a business loss while still receiving partial payment from the sale. This structure allows providers and debt buyers to benefit financially through both tax advantages and modest debt recovery, while the state’s public funds underwrite the nonprofit’s purchase.
Delaware joins California, Colorado, Connecticut, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington. These states have restricted or prohibited medical debt from appearing on consumer credit reports.
