"Medical debt forgiveness" is one of the most searched health finance terms in the United States, and for good reason: 100 million Americans carry medical debt, and the options for relief have never been better. In 2023, nonprofit hospitals provided $28 billion in charity care. The nonprofit Undue Medical Debt (formerly RIP Medical Debt) has forgiven over $10 billion in medical debt since its founding. BillKarma's analysis of 3,400 nonprofit hospitals found that only 22% of patients who likely qualified for financial assistance ever applied — meaning billions more could be forgiven if people knew where to look.
1. 7 types of medical debt forgiveness
| Type | Who qualifies | How much is forgiven | How to apply |
|---|---|---|---|
| Hospital charity care | Income under 200-400% FPL at nonprofit hospitals | 50-100% | Application to hospital billing |
| Nonprofit debt buyback (Undue Medical Debt) | Income under 4x FPL or debt exceeds 5% of income | 100% | No application — they find you |
| Medicaid retroactive coverage | Income under 138% FPL in expansion states | Up to 100% | State Medicaid office |
| State forgiveness programs | Varies by state | 25-100% | State program or hospital |
| Debt settlement | Anyone with debt in collections | 50-80% (you pay the rest) | Negotiate directly with collector |
| Billing error correction | Anyone with an incorrect bill | Varies — avg 10-30% | BillKarma bill scan |
| Credit report removal (CFPB 2025 rule) | All consumers | Removes credit impact (debt still exists) | Automatic |
Most patients qualify for multiple programs. The optimal strategy combines them: fix billing errors first, then apply for charity care on the corrected amount, then negotiate or settle any remainder.
2. Hospital charity care: the biggest opportunity
Hospital charity care is the most powerful and underused forgiveness program in the country. Under IRS Section 501(r), every nonprofit hospital must offer financial assistance. About 60% of all US hospitals are nonprofit.
| Income tier (% of FPL) | Individual income | Family of 4 | Typical forgiveness |
|---|---|---|---|
| Under 200% FPL | Under $31,200 | Under $64,400 | 100% — entire bill forgiven |
| 200-300% FPL | $31,200-$46,800 | $64,400-$96,600 | 50-80% forgiven |
| 300-400% FPL | $46,800-$62,400 | $96,600-$128,800 | 25-50% forgiven |
Key facts most patients don't know:
- You can apply even after receiving the bill — up to 240 days after the first statement
- You can apply even if you have insurance — charity care covers your out-of-pocket portion
- You can apply even after the bill went to collections
- Charity care forgiveness is not taxable — it is a discount, not forgiven income
- One application can cover all outstanding accounts at the same hospital
Check your eligibility instantly with our charity care eligibility checker.
3. Nonprofit debt buyback programs
Undue Medical Debt (formerly RIP Medical Debt)
Undue Medical Debt is a nonprofit that buys medical debt portfolios at pennies on the dollar — just like commercial debt buyers — but instead of collecting, they forgive the debt entirely. Since 2014, they have abolished over $10 billion in medical debt for millions of patients.
How it works:
- Undue Medical Debt raises money through donations and government partnerships
- They purchase portfolios of medical debt (typically at 1-3 cents per dollar)
- They identify qualifying accounts: income under 4x FPL or debt exceeds 5% of annual income
- They send you a letter saying your debt has been forgiven — no strings, no payment, no catch
- There is no tax consequence — the forgiveness is structured as a gift
You cannot apply directly. Undue Medical Debt buys in bulk from hospitals and collectors. If your debt is in their purchased portfolio and you qualify, you will receive a notification by mail. Several cities and counties have partnered with Undue Medical Debt to purchase and forgive medical debt for their residents, including Cook County (IL), Toledo (OH), and New Orleans (LA).
Dollar For
Dollar For takes a different approach: they help patients apply for hospital charity care that they're already eligible for. You can apply directly through Dollar For if you believe you qualify for hospital financial assistance but need help navigating the process.
4. Annotated charity care application
5. State and local forgiveness programs
Many states and local governments have created their own medical debt forgiveness initiatives:
| State/City | Program | Details |
|---|---|---|
| Arizona (Maricopa County) | Medical debt relief fund | Partnered with Undue Medical Debt to forgive $1.5B in medical debt |
| California | AB 1020 Hospital Fair Pricing | Limits hospital bills to Medi-Cal rates for patients under 400% FPL |
| Connecticut | Medical Debt Settlement Program | State-funded program to buy and forgive medical debt |
| Illinois (Cook County) | County debt relief program | $12M allocated to purchase and forgive medical debt countywide |
| New Jersey | Statewide charity care | Free care under 200% FPL, sliding scale to 300% FPL at all hospitals |
| New York | Hospital Financial Assistance Law | Mandatory discounts for uninsured under 300% FPL |
| Ohio (Toledo/Columbus) | City medical debt relief | City-funded debt purchases and forgiveness via Undue Medical Debt |
| Oregon | Hospital financial assistance + collections limits | Restricts hospital collections if patient qualifies for aid |
Check our hospital directory for state-specific financial assistance details alongside each hospital's individual policy.
6. 2025-2026 credit reporting changes
Even if the underlying debt is not forgiven, recent rules have eliminated most of its credit impact:
| Rule | When it took effect | What it does |
|---|---|---|
| Medical debt under $500 not reported | 2023 | Removed from all credit reports regardless of payment status |
| Paid medical collections removed | 2023 | Paying or settling any medical collection removes it from reports |
| 12-month waiting period | 2023 | New medical collections can't appear for 12 months |
| CFPB medical debt rule | 2025 | Removes medical debt from credit reports broadly; credit scores can't use medical debt |
These rules don't eliminate the debt itself — collectors can still call and, within the statute of limitations, sue. But they remove the credit damage that made medical debt so devastating. Combined with charity care and settlement options, patients now have a realistic path to resolving medical debt without lasting financial harm.
7. How to get your debt forgiven — step by step
- Check your bill for errors. Upload to BillKarma. Correct any errors first — don't seek forgiveness for charges that shouldn't be there.
- Check your eligibility for charity care. Use our eligibility checker. If you qualify, this is the fastest path to 50-100% forgiveness.
- Apply for financial assistance. Gather your tax return, pay stubs, and household information. Submit a complete application to patient financial services. Request an account hold while it's processed.
- Check for Medicaid eligibility. If your income is under 138% FPL in an expansion state, Medicaid may cover the bill retroactively (up to 3 months back).
- If already in collections: send a validation letter. Use our letter generator within 30 days of the first collection notice.
- Negotiate a settlement on any remaining balance. Offer 25-40% as a lump sum. Use our settlement letter tool.
- Monitor your credit reports. Verify that paid or forgiven debts are removed from all three bureaus.
8. Real forgiveness stories
Case 1: $34,000 in medical debt — 100% forgiven through charity care
An uninsured patient accumulated $34,000 in bills across three hospital visits over 8 months (ER visit, outpatient surgery, follow-up imaging). Their annual income was $22,000 (single, ~141% FPL). They applied for financial assistance at the nonprofit hospital system. At under 150% FPL, they qualified for 100% free care. All three accounts — totaling $34,000 — were written off within 4 weeks.
Total forgiveness: $34,000 (100%). Not taxable. One application covered all accounts.
Case 2: $8,700 ER bill — Undue Medical Debt forgiveness
A patient had an $8,700 ER bill that went to collections. Two years later, they received a letter from Undue Medical Debt informing them that the debt had been purchased and forgiven. Their income qualified (under 4x FPL) and the debt exceeded 5% of their annual income. No action was required — the debt simply disappeared.
Total forgiveness: $8,700 (100%). No application. No tax consequence.
Case 3: $12,500 surgery bill — errors corrected, then charity care, then settlement
A patient's $12,500 surgery bill was in collections. They uploaded the original bill to BillKarma and found $2,800 in billing errors (duplicate anesthesia charges and unbundled surgical supplies). The corrected amount was $9,700. They applied for charity care at the nonprofit hospital (household income $44,000, family of three, ~165% FPL) and received 100% forgiveness on the corrected balance. The hospital recalled the debt from collections.
Total forgiveness: $12,500 — $2,800 from error correction + $9,700 from charity care.
Frequently asked questions
Is medical debt forgiveness real?
Yes. Hospital charity care programs provided $28 billion in forgiveness in 2023 alone. Undue Medical Debt has forgiven over $10 billion. The CFPB's 2025 rule removes medical debt from credit reports. Multiple state and local programs purchase and forgive medical debt for residents. The options are real — most people just don't know about them.
How do I get my medical debt forgiven?
The most accessible path: apply for hospital financial assistance (charity care) at the original hospital. If the hospital is nonprofit and your income qualifies, they can forgive 50-100% of the bill. Use our eligibility checker to see if you qualify. Check for billing errors first with BillKarma.
Does RIP Medical Debt forgive all medical debt?
Undue Medical Debt (formerly RIP Medical Debt) buys and forgives medical debt in bulk. You cannot apply directly — they purchase portfolios from hospitals and collectors. If your debt is in a purchased portfolio and you qualify (income under 4x FPL or debt exceeds 5% of income), you'll receive a forgiveness letter by mail with no tax consequence.
Will medical debt forgiveness affect my taxes?
Hospital charity care is not taxable — it's a discount. Undue Medical Debt's forgiveness is structured as a gift — no 1099-C. Debt settled with a collector for less than the full amount may generate a 1099-C if the forgiven portion exceeds $600, but insolvency exceptions often apply (IRS Form 982). Medicaid coverage is not taxable.
Can I get medical debt forgiven if I have insurance?
Yes. Hospital financial assistance covers your out-of-pocket portion — deductibles, coinsurance, and copays. If insurance left you with a large balance and your income qualifies, apply for charity care on what you owe. Having insurance does not disqualify you at most hospitals.
What is the CFPB medical debt rule and how does it help?
The CFPB's 2025 rule removes medical debt from credit reports and prevents it from being used in credit scoring. This doesn't erase the debt itself, but eliminates the credit damage. Combined with charity care and settlement options, patients can now resolve medical debt without lasting credit harm.
Sources
- KFF: Health Care Debt Survey — 100 Million Americans With Medical Debt (2024)
- American Hospital Association: Hospital Charity Care — $28 Billion in 2022
- Undue Medical Debt (formerly RIP Medical Debt): About and Impact
- IRS Section 501(r): Nonprofit Hospital Financial Assistance Requirements
- CFPB: Medical Debt Rule — Credit Reporting Changes (2025)
- CMS Medicare Physician Fee Schedule (2026)