California’s SB1061: Medical Debt and Credit Reports Explained

As the trend continues to remove medical debt from credit reports, California is the latest state to do so with SB1061, introduced by Senator Monique Limón, a Democrat from Santa Barbara.

Listen to this podcast.

Key Points:

• California has passed SB1061, a new law that removes medical debt from credit reports, introduced by Senator Monique Limón.
• The three major credit reporting agencies—Equifax, Experian, and TransUnion—have stopped reporting medical bills under $500, but anything above that can still be listed, depending on your state.
• The new law, SB1061, is a step in the right direction, with other states like New York following a similar trend.
• Thirty-eight percent of California residents have medical bills on their credit reports, making this law a crucial change.
• Make sure to review your credit reports regularly and dispute any errors.

California Law Removes Medical Debt from Credit Reports

SB1061 addresses medical bills on your credit report, which is a huge issue. There are three major credit reporting agencies: Equifax, Experian, and TransUnion. They’ve already stopped reporting medical bills, but only up to $500. However, if anything above that is listed, your credit score will drop.

Honestly, this never made sense to me because medical bills are the number one reason people file for bankruptcy. The second reason is health-related issues, which result in missing work, and the third is divorce.

When I started practicing bankruptcy law more than two decades ago, I thought it was unfair that people were punished for getting sick. You don’t ask to get sick. You can control some things, like losing your job or having your car repossessed, but not getting sick. But SB1061 is another step in the right direction as more states continue to follow this trend.

• Avoid Bankruptcy Because of Hospital Billing Tactics

When I used to do personal injury work, it was revolting to see clients involved in car accidents having their credit destroyed because of medical bills. These cases can take up to two to three years to settle, and in the meantime, clients’ credit scores are getting destroyed.

A personal injury attorney can’t even proceed toward settlement until the client is done with treatments, yet creditors seek payments from the injured party.  When the final medical bill is received, the balance negotiation starts. So it takes time.

With thirty-eight percent of California residents having medical bills, this law is long overdue. I recommend that you check your credit report in about sixty days to confirm that medical bills have been removed from your credit report. You should also get in the habit of checking your credit report regularly. You can get your credit report for free every twelve months from this website.

Now, for 2025, I’m starting something new, and that is closing with a positive affirmation. So here’s my first positive affirmation: You control money; money does not control you. You are in charge.

If you have any questions or comments, let me know. Feel free to post them on my YouTube video, which you can see below.

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

Additional blog content is available below or by using the search bar at the top of this page:

• Bankruptcy
• Your Wallet

Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.