SB 1061 Update: Is Medical Debt Still on Your California Credit Report?

As 2026 begins, the movement to scrub medical debt from credit reports has shifted from a “trend” to the law in California. With Senate Bill 1061 (SB 1061) now fully in effect, California residents have some of the strongest protections in the nation when it comes to the impact of medical debt on their credit reports.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Listen: The Professor’s Audio Briefing.

Key Points for 2026 and Medical Debt

• The Law is Active: As of January 1, 2025, SB 1061 prohibits credit reporting agencies from including any medical debt on California consumer credit reports.
• Total Ban: Unlike the voluntary $500 threshold set by Equifax, Experian, and TransUnion, California law removes medical debt regardless of the dollar amount.
• Voiding the Debt: Healthcare providers and debt collectors are barred from furnishing this data to agencies. If they knowingly do so, the debt can actually be declared void and unenforceable.
• Medical Debt and Bankruptcy: Roughly 38% of Californians have historically carried medical debt. SB 1061 finally addresses the issue behind the number one reason debtors file for bankruptcy.

The End of Punishing Debtors’ Credit Scores for Getting Sick

In my two decades of practicing bankruptcy law, I have seen thousands of lives destroyed financially because of medical debt. It has always been fundamentally unfair: you don’t choose to get sick. While you can often control discretionary spending or high-end expenses such as a mortgage or car loan, you cannot control a sudden medical diagnosis or medical emergency.

SB 1061, championed by Senator Monique Limón, recognizes that medical debt is not a reliable predictor of creditworthiness. If a lender sees medical debt on your report, they are now legally barred from using it to deny you a loan, a job, or housing in the state of California.

A Shield Against Hospital Billing Tactics- Putting Consumer Debtors First

During my years in personal injury law, I witnessed a “revolving door” of credit destruction. A client would be injured in a car accident, and by the time treatments were finished and the case was settled with numerous creditors, hospitals had already sent their bills to collections, destroying the client’s credit score.

Of course, bankruptcy isn’t an option because any non-exempt funds from the settlement would go to the bankruptcy estate, meaning the client would be left with nothing.

SB 1061 stops this cycle. Because creditors can no longer “weaponize” your credit score to force quick payments, patients have more breathing room to negotiate balances and wait for insurance or legal settlements to finalize.

Important: Don’t Confuse Federal Guidance with State Law

Important: Don’t Confuse Federal Guidance with State Law

As of early 2026, there has been some back-and-forth at the federal level regarding the CFPB’s (Consumer Financial Protection Bureau) authority over credit reporting. While federal rules have faced challenges, California’s state law remains your primary shield. Even if federal “bans” are debated in Washington, SB 1061 is a state-level mandate that credit reporting agencies must follow for California residents.

Protect Your Credit Score. Steps to Take Now

Pull Your Reports: Visit AnnualCreditReport.com for your free annual credit report from the three major credit reporting bureaus: Equifax, Experian, and TransUnion.

Verify Removal: If you had medical debt over $500 prior to 2025, it should be gone.

Dispute Errors: If a medical provider is still reporting debt to a credit bureau, they are in violation of California law. You should dispute this immediately and mention SB 1061 in your letter.

Professor’s Tip: In this prior article, I provide sample letters to dispute errors on your credit report. While you might be tempted to use a Credit Repair Organization, I am critical of the industry, as I have seen too many situations of debtors being taken advantage of. While it is my opinion that you can file a dispute without a lawyer’s assistance or that of a Credit Repair Agency, if you decide to hire one, please read this article to better understand your rights and confirm they are complying with the law: The Credit Repair Organizations Act- (15 U.S.C. Chapter 41, Subchapter II-A).

The Professor’s Conclusion

You control money; money does not control you. You are in charge of your financial recovery. Take steps now to protect your credit score. In today’s world, it’s even common for employers to review your credit report. So even if you are not in California, review your credit report as errors are common. I wrote a prior article on this issue that you can read here.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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