Medical debt is the leading cause of bankruptcy in America, but recent regulatory changes have significantly changed how it affects your credit. Understanding these changes can help you prioritize which debts to tackle and which can wait.

What Changed

As of 2025, the three major credit bureaus no longer report medical debt that has been paid or is under $500. Additionally, medical debt in collections now has a 365-day waiting period before it can appear on your credit report — giving you a full year to resolve the bill before it affects your credit. These changes removed billions of dollars in medical debt from consumer credit reports. However, the debt itself still exists and collectors can still pursue payment.

What Has Not Changed

Medical debt over $500 that remains unpaid for more than a year can still appear on your credit report and impact your score. Medical providers can still sue you for unpaid bills, and a court judgment will appear on your credit report regardless of these rules. Additionally, if you paid a medical bill with a credit card, it becomes credit card debt — not medical debt — and is not protected by these rules. Never pay medical bills with credit cards if you can avoid it.

How to Handle Medical Debt

First, always ask for an itemized bill. Billing errors are common and you may find duplicate charges or services you never received. Second, negotiate. Many hospitals offer income-based financial assistance or sliding-scale discounts — but you have to ask. Third, request a payment plan directly with the provider before the debt goes to collections. Medical providers generally prefer payment plans over selling the debt to collectors for pennies on the dollar. Fourth, if the debt is already in collections, you can still negotiate a settlement — often for less than the full amount.

Social Security Disability Insurance recipients face a unique set of overpayment risks. The rules around working while disabled, trial work periods, and substantial gainful activity are complex — and missteps can lead to large overpayments that threaten your financial stability.

Trial Work Periods and Overpayment Risk

SSDI recipients are entitled to a nine-month Trial Work Period during which they can test their ability to work without losing benefits, regardless of how much they earn. After the Trial Work Period ends, you enter a 36-month Extended Period of Eligibility where you can still receive benefits for any month your earnings fall below Substantial Gainful Activity, or SGA. The problem: many people do not realize when their Trial Work Period has ended or fail to report earnings properly during the Extended Period of Eligibility, resulting in overpayments.

Reporting Requirements

SSDI recipients must report changes in work activity, earnings, and certain other life changes to the SSA promptly. This includes starting or stopping a job, changes in job duties or hours, changes in pay rate, and receiving other disability benefits. Even if you think a change is minor, report it. The SSA does not always process reports correctly, but having proof that you reported on time is your best defense against a fault-based overpayment finding.

Expedited Reinstatement

If your SSDI benefits stop because of work earnings and you later find you cannot continue working due to your disability, you can request Expedited Reinstatement, or EXR. This allows your benefits to restart temporarily while the SSA reviews your case — without filing a new application. You can request EXR within five years of your benefits ending. During the provisional benefit period, you can receive up to six months of benefits while the SSA decides, and those provisional payments do not have to be repaid even if the SSA ultimately denies reinstatement.

It is tempting to bury an SSA overpayment notice in a drawer and hope it goes away. It will not. The Social Security Administration has powerful collection tools, and ignoring the notice only limits your options. Here is what actually happens when you do not respond.

Automatic Benefit Withholding

If you are currently receiving Social Security benefits, the SSA will begin withholding a portion of your monthly payment to recover the overpayment. For SSI recipients, the default withholding is generally 10 percent of your monthly benefit. For SSDI or retirement benefits, the SSA will typically withhold the full monthly benefit until the debt is satisfied — unless you request a lower withholding rate due to financial hardship. If you are no longer receiving benefits, the SSA will send you billing notices demanding payment.

Treasury Offset Program

If you do not respond and do not repay, the SSA will refer your debt to the Treasury Offset Program. Through TOP, the government can intercept your federal tax refunds, garnish a portion of your wages, and even take a percentage of other federal payments you may receive — including future Social Security benefits if you later become eligible. The Treasury can also report your debt to credit bureaus, damaging your credit score.

Your Options Do Not Expire

Even if you have ignored previous notices, you can still take action. You can file a reconsideration, request a waiver, or negotiate a repayment plan at any point — even after collection has started. The worst outcome comes from continued inaction. If the amount is too high to repay in a lump sum, the SSA will generally agree to a monthly payment plan that fits your budget. The key is making contact and engaging with the process rather than hiding from it.

A reconsideration is the first level of appeal when you disagree with a Social Security overpayment determination. It is a complete review of your case by someone who was not involved in the original decision. Getting this step right can save you months of additional proceedings.

When to File a Reconsideration

You can file a reconsideration if you disagree with the fact that you were overpaid, the amount of the overpayment, or the finding that you were at fault. For example, if the SSA says you were overpaid $8,000 but your records show it should be $3,000, a reconsideration can correct the amount. Or if the SSA says you failed to report income when you actually did report it, a reconsideration lets you present that evidence.

The 60-Day Deadline

You generally have 60 days from the date you receive the overpayment notice to file a reconsideration request. There is an additional 5 days built in for mail delivery. If you miss the deadline, you can still file if you have good cause for the delay — such as a medical emergency, a death in the family, or not receiving the notice in time. But do not count on good cause being accepted. File as soon as possible.

What to Include in Your Request

Your reconsideration request should include your name, Social Security number, a clear statement that you are requesting reconsideration, the specific determination you disagree with, and all evidence supporting your position. This could include pay stubs, bank statements, letters from employers, medical records, or any documentation that contradicts the SSA findings. A written explanation of why you believe the determination is incorrect is critical — do not assume the reviewer will figure it out from the documents alone.

What Happens Next

After you file, the SSA will review all the evidence and issue a written decision. This typically takes several months. While your reconsideration is pending, the SSA will continue withholding benefits to recover the overpayment unless you also request a waiver of recovery during the reconsideration process. If the reconsideration is denied, your next step is a hearing before an administrative law judge.

When the Social Security Administration sends an overpayment notice, the amount can be staggering — often thousands or even tens of thousands of dollars. But if the overpayment was not your fault and you cannot afford to pay it back, you may qualify for a waiver that eliminates the debt entirely.

The Two-Prong Test for Waivers

To qualify for an SSA overpayment waiver, you must meet two conditions. First, you must show that you were without fault in causing the overpayment. Fault means more than just making a mistake — it involves knowingly providing incorrect information, failing to report something you knew you should report, or accepting payments you knew or should have known were incorrect. Second, you must show that repayment would either defeat the purpose of the Social Security Act (meaning you rely on benefits for basic needs and cannot afford to repay) or be against equity and good conscience (meaning it would be fundamentally unfair).

Gathering Your Evidence

The most important piece of evidence is financial documentation showing that you cannot afford to repay. This includes bank statements, rent or mortgage records, utility bills, medical expenses, and any other evidence of your monthly obligations. You should also explain in writing why you were not at fault — perhaps the SSA had incorrect earnings data, failed to process a change you reported, or continued paying after you told them to stop. Written statements from doctors, social workers, or family members can also support your claim.

The Waiver Process

To request a waiver, file Form SSA-632, Request for Waiver of Overpayment Recovery. You can also simply write a letter requesting a waiver and explaining your circumstances. The SSA will review your request and may schedule a personal conference before making a decision. If your waiver is denied, you have the right to appeal and request a hearing before an administrative law judge. Many waivers that are initially denied get approved at the hearing level.

The IRS audits less than one percent of individual returns, but certain factors can significantly increase your odds. Understanding what catches the IRS attention can help you file accurately and reduce unnecessary anxiety — especially if you are already dealing with tax debt.

Common Audit Triggers

The IRS uses a computerized scoring system called the Discriminant Information Function, or DIF, to flag returns for review. Several things can raise your DIF score. Reporting unusually high deductions relative to your income is a major trigger — if your charitable contributions or business expenses are far above what is typical for your income bracket, expect scrutiny. Large round numbers on your return look suspicious because real expenses rarely come out to exactly $5,000. Claiming 100 percent business use of a vehicle is another red flag.

Income-Related Triggers

Failing to report all your income is the surest way to trigger an audit. The IRS receives copies of every W-2, 1099, and K-1 issued to you, and its automated matching system compares these to what you report. Even a small discrepancy can generate a CP2000 notice proposing additional tax. Self-employed individuals reporting very high income or claiming consistent losses year after year also face increased audit risk — the IRS wants to know whether the activity is really a business or just a hobby.

What Happens If You Are Audited?

Most audits are conducted by mail — the IRS simply requests documentation for specific items on your return. Only a small percentage involve in-person meetings. If you receive an audit notice, respond by the deadline, provide only the documents requested (do not volunteer extra information), and consider professional representation. An audit does not automatically mean you did something wrong — sometimes the IRS just needs clarification. But if the audit does result in additional tax owed, you have options including payment plans and appeals.

When you file a joint tax return, both spouses are generally liable for the full amount of tax owed — even if only one spouse earned the income or made the errors. This rule, called joint and several liability, can create nightmares for people whose spouses hid income, claimed improper deductions, or simply failed to pay. Innocent Spouse Relief exists for exactly these situations.

Who Qualifies for Innocent Spouse Relief?

To qualify, you must show that you filed a joint return with an understatement of tax that was attributable to your spouse erroneous items, that at the time you signed the return you did not know and had no reason to know about the understatement, and that taking into account all the facts and circumstances, it would be unfair to hold you liable. The IRS considers factors like whether you received a significant benefit from the understated tax, whether you were abandoned or divorced, and your education and involvement in household finances.

Types of Relief Available

There are actually three types of relief. Classic Innocent Spouse Relief applies when there is an understatement of tax due to your spouse errors. Separation of Liability Relief divides the understatement between you and your former spouse — available if you are divorced, legally separated, or have lived apart for at least 12 months. Equitable Relief applies when you do not qualify for the other types but it would still be unfair to hold you liable — this can even cover underpayments where the tax was correctly reported but never paid.

Time Limits and How to Apply

You generally must file Form 8857 within two years after the IRS first attempts to collect from you. The IRS must then determine your eligibility and will contact your spouse or former spouse, who has the right to participate in the proceedings. This can be uncomfortable, but it is a necessary part of the process. The IRS is prohibited from collecting from you while your request is being reviewed.

An IRS wage garnishment is one of the most aggressive collection tools the government has. Unlike private creditors who must first sue you and obtain a court judgment, the IRS can begin garnishing your wages after sending a few notices. And the percentage they can take is often much higher than what a private creditor can claim.

How IRS Garnishments Differ from Other Garnishments

A typical creditor garnishment is limited to 25 percent of your disposable earnings or the amount above 30 times the federal minimum wage — whichever is less. The IRS is not bound by those limits. Instead, the IRS leaves you with an exempt amount based on your filing status and number of dependents, and takes everything above that. For a single person with no dependents, the IRS can take nearly everything except a small exempt amount roughly equivalent to the standard deduction divided by 52 weeks.

The Notice Process

Before garnishing your wages, the IRS must send you a series of notices. It starts with a Notice and Demand for Payment, followed by a Final Notice of Intent to Levy and a Notice of Your Right to a Hearing. The Final Notice is your last chance to act before the garnishment begins. You generally have 30 days from that notice to request a Collection Due Process hearing, which temporarily stops the levy while your case is reviewed.

How to Stop a Garnishment

There are several ways to stop or prevent an IRS wage garnishment. The most direct is paying the balance in full. If you cannot do that, entering into an Installment Agreement (a payment plan) will usually stop the garnishment. You may also qualify for Currently Not Collectible status if you can show that paying anything would leave you unable to meet basic living expenses. An Offer in Compromise, if accepted, will also release the garnishment. The worst thing you can do is ignore the notices — the IRS will proceed without you, and your employer is legally required to comply.

You have probably seen advertisements promising to settle your tax debt for pennies on the dollar. That program is real — it is called an Offer in Compromise, or OIC. But it is not available to everyone, and the IRS accepts only about one in three applications. Understanding the requirements before you apply can save you time, money, and frustration.

What Is an Offer in Compromise?

An OIC is an agreement between you and the IRS that settles your tax debt for less than the full amount owed. The IRS accepts an offer when it believes the offered amount represents the most it can reasonably expect to collect within a reasonable period. In other words: if you genuinely cannot pay the full amount and your financial situation is unlikely to improve, the IRS may accept less.

The Three Types of Offers

There are three grounds for an OIC. Doubt as to Collectibility is the most common — you cannot pay the full amount now or in the foreseeable future. Doubt as to Liability means you genuinely dispute whether you actually owe the tax. Effective Tax Administration means you owe the tax and can pay, but doing so would create an economic hardship or be unfair. Each type requires different supporting evidence and documentation.

How the IRS Calculates Your Offer

The IRS uses a formula called Reasonable Collection Potential, or RCP. It looks at your assets (real estate, vehicles, bank accounts, retirement accounts) and your future income (monthly income minus allowable living expenses, multiplied by the months remaining in the collection statute). The RCP is the minimum the IRS will usually accept. If your offer is below your RCP, it will likely be rejected.

Beware of OIC Mills

Many companies advertise OIC services with unrealistic promises. They charge thousands of dollars upfront and submit offers they know will be rejected. Before hiring anyone, check their track record and be wary of guarantees. Many people can handle the OIC process themselves using the IRS Offer in Compromise Pre-Qualifier tool on the IRS website.

The reason you left your last job is the single most important factor in whether you qualify for unemployment benefits. But the distinction is not always as simple as quit versus fired — the details matter, and the burden of proof can shift depending on the circumstances.

When Quitting Does Not Disqualify You

Generally, if you quit voluntarily, you are not eligible for unemployment. But there is an important exception called good cause. Good cause quitting includes situations like unsafe working conditions, a significant reduction in hours or pay, harassment or discrimination that your employer failed to address, being asked to perform illegal activities, or needing to relocate due to a spouse military transfer or domestic violence. The key is that you must have made a reasonable effort to resolve the issue with your employer before quitting — simply being unhappy is not enough.

When Being Fired Disqualifies You

If you were fired for misconduct, you are typically disqualified from receiving benefits. Misconduct generally means intentional or reckless behavior that violates workplace rules — things like theft, repeated unexcused absences, insubordination, or violating a known company policy. However, being fired for poor performance, not being a good fit, or simple mistakes usually does NOT rise to the level of misconduct and you may still qualify.

The Burden of Proof

In most states, the employer has the burden of proving misconduct if they want to block your benefits. If they cannot provide sufficient evidence — written warnings, documentation of policy violations, or witness statements — the unemployment agency will often rule in your favor. This is why you should always respond to agency requests for information and participate in any fact-finding interviews. Your side of the story matters.