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Late-night TV show host wipes out millions in medical debt

Residents of Long Island may be familiar with the work of "Last Week Tonight" television host John Oliver. In one recent episode regarding the debt-buying industry -- an industry that brings in billions of dollars -- Oliver cancelled over $14 million of medical debt for almost 9,000 individuals.

Viewers of the show may wonder, however, who, and what, are "debt buyers." Debt buyers are individuals and companies that purchase past due accounts from creditors for very little money and then tries to collect the debt from the debtor. There have been many consumer complaints filed against debt buyers. Consumers may receive threatening phone calls or even be called on to pay a bill that was previously settled but erroneously resurfaces again. Despite this, in some states debt buyers do not even need to have a license to buy or seek collections on debts.

To prove this point, Oliver's team set up a corporation in another state for $50 called "Central Asset Recovery Professionals" (CARP). For less than $60,000, CARP was able to buy nearly $15 million in debt. However, instead of pursuing collections on the debt, CARP donated it to a nonprofit company, RIP Medical Debt, that clears medical debt in a way that eliminates the negative tax consequences the individual may otherwise experience.

Looking ahead to fall, debtors will have some more protections, at least when it comes to medical debt. As part of a settlement made in 2015, there will be a six-month grace period before a medical debt that was sent to collections will appear on the debtor's credit report. This gives debtors time to contest the debt or take other appropriate actions when it comes to settling their medical debt. In fact, according to at least one estimate, as many as 80 percent of medical bills have mistakes in them.

All of this being said, medical debt is still a serious issue affecting the credit of almost 43 million Americans. In fact, for 15 million of these individuals, a past due medical account is the only item on the individual's credit report that is in collections. If an individual is struggling with medical debts, and/or other debts, he or she may want to see if filing for bankruptcy is an option for debt relief.

Source: CNBC, "John Oliver takes a $14M bite out of medical debt," Kelli B. Grant, June 6, 2016

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