Search “medical debt forgiveness” and most of what comes back is advertising: companies promising to make your bills disappear, quoting a percentage they can knock off, asking for money up front. Almost none of that is forgiveness. It is debt settlement with a fee attached, and federal regulators have said so in writing.
Real forgiveness exists. There are five routes by which a US medical debt actually stops being owed. Two cost you nothing. One you cannot even apply for. Before working any of them, confirm you owe the bill at all: an out-of-network charge from an emergency visit or from a provider you did not choose may be barred outright under the No Surprises Act. All figures here are current as of September 2026.
Step 1: Start With the Hospital’s Own Charity Care Policy
This is the highest-yield route and the one people skip. Every nonprofit hospital must have a written financial assistance policy, and those policies routinely write off 100% of the bill for households under a set income threshold, often 200% to 400% of the federal poverty level. Many apply it retroactively to bills months old and to accounts already with a collector.
The income cutoffs, deadlines, and a request letter template are on our hospital charity care page, and the charity care check tool looks up a specific hospital’s policy. Do this first: charity care erases the debt at the source, leaves no settlement notation on your credit file, and generates no tax paperwork.
Step 2: Understand What Undue Medical Debt Actually Does
Undue Medical Debt, called RIP Medical Debt until it rebranded on April 15, 2024, is behind most of the “my debt was erased out of nowhere” stories you have read.
Undue uses donated money to buy medical debt in large bundled portfolios, then abolishes it. Because uncollectible medical debt trades at a steep discount, the leverage is enormous: Undue reports each $1 donated erases about $100 of debt. The April 2025 Pendrick Capital Partners purchase is the clearest example. Per KFF Health News, Undue spent $36 million to retire $30 billion in face value covering roughly 20 million people, average balance $1,100, with about half those debts over seven years old and donated outright rather than bought.
You cannot apply. Undue’s site states that “medical debt relief cannot be requested and recipients don’t have to apply,” and that it “cannot abolish medical debt by individual request.” Eligibility comes from portfolio data: households at or below four times the federal poverty level, or people whose medical debt exceeds 5% of annual income. If your debt sits in a portfolio Undue buys and you meet one of those tests, a letter arrives. That is the entire process.
Any company offering to get you onto an Undue list, or charging a fee to “apply” for nonprofit medical debt forgiveness, is selling something that does not exist.
Step 3: Check Whether Your State or County Has Bought Your Debt
Public money now does the same thing. As of August 2026, Undue reports roughly $65 million in government funds has relieved more than $11 billion in medical debt for over 6.5 million people, through partnerships begun in 2022 and funded with American Rescue Plan Act dollars, general fund appropriations, or Medicaid payment structures:
- North Carolina routed it through Medicaid, paying hospitals more under the Healthcare Access and Stabilization Program if they erased uncollectible debt for lower-income households, expanded charity care, and stopped credit reporting. All 99 acute care hospitals signed on, and over $3 billion has been relieved for more than 870,000 residents.
- Arizona put $10 million in ARPA funds toward debt purchase, erasing more than $1 billion for over 720,000 Arizonans as of July 2026.
- Los Angeles County started with $5 million from the Board of Supervisors in 2024 and has erased almost $450 million for over 220,000 residents. Vermont redirected $1 million already in the State Treasurer’s budget, on track for up to $100 million.
You still cannot apply. What you can do is search your state treasurer’s or governor’s site for a medical debt relief program, so you recognize the letter when it arrives.
Step 4: Confirm the Tax Treatment Before You Panic
There is no medical-debt-specific IRS notice. The rules come from the general cancellation-of-debt framework in IRS Topic no. 431: canceled debt is generally taxable, with exceptions that cover most medical situations.
Gifts are an explicit exception, and Undue calls its relief “a gift from a detached and disinterested third party” and does not file a Form 1099-C, which is why abolishment letters arrive with no tax paperwork. Topic no. 431 also excepts “amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, had paid it.” Medical expenses are deductible, which is the quiet reason forgiven medical bills so often produce no taxable income even outside the gift route. Two more exclusions apply broadly here: insolvency, to the extent your liabilities exceed your assets (reported on Form 982), and bankruptcy, where Title 11 discharges are excluded outright.
A 1099-C genuinely can appear after a negotiated settlement for $600 or more of forgiven balance. If one arrives, do not assume it is taxable. Check insolvency and the deductible-expense exception first.
Step 5: Negotiate a Settlement, and Know What the Debt Cost Them
If charity care is out and nobody bought your portfolio, settlement is the route you control. Your leverage is that whoever holds the paper almost certainly paid a small fraction of face value.
The published anchors span a wide range because they measure different things. The FTC’s study of more than 3,400 portfolios found debt buyers paid an average of 4.0 cents per dollar of face value across all consumer debt. Undue’s donation ratio implies about 1 cent on medical portfolios, and the Pendrick deal works out to about 0.12 cents ($36 million for $30 billion), partly because half that paper was donated. The message is the same at every point in that range: a buyer who paid single-digit cents on the dollar can accept far less than the balance and still profit.
Ask for a lump-sum settlement, in one call:
“Hi, I’m calling about account [number], balance [amount]. I want to resolve this today rather than let it sit. I can’t pay the full balance. What I can do is pay [25% of the balance] as a one-time lump sum to close the account in full. If we agree, I need it in writing before I pay: the settlement amount, that it satisfies the account in full, and that the account will be reported as paid or settled and not resold. Can you do that, or do I need someone who can?”
Three rules. Never pay before the agreement is in writing. Never give a collector direct bank access. And on old debt, a partial payment can restart your state’s clock for suing you, covered on our medical debt statute of limitations page. If the account is already with a collector, read medical bills in collections and request validation before you offer a dollar; the bureaus remove paid medical collections entirely, which is covered under medical bills on your credit report. For a bill still with the provider, the negotiation script tool and our negotiating medical bills guide cover the pre-collections version.
Step 6: Treat “Medical Debt Relief” Companies as What They Are
Companies advertising medical debt relief are, with rare exceptions, debt settlement firms. The CFPB’s guidance on debt settlement is unusually blunt for a federal agency:
“Debt settlement may well leave you deeper in debt than you were when you started.”
The CFPB lists the harms: expensive fees, instructions to stop paying your bills (which adds late fees and penalty interest and invites lawsuits), creditors who refuse to deal with the company at all, fees on the dedicated account they make you fund, and credit damage. Its avoid-this list says walk away from any company that charges fees before settling, promises a specific percentage reduction, guarantees your debt will go away, tells you to stop communicating with creditors, or guarantees pennies on the dollar.
The upfront fee point is law, not advice. Under the FTC’s Telemarketing Sales Rule a debt relief company “can’t collect any fees from a customer before you have settled or otherwise resolved the consumer’s debts.” In July 2025 the FTC obtained a court order halting the “Accelerated Debt” operation, seven companies and three individuals the agency says targeted older consumers and veterans while claiming it could cut debts by 75% or more. If a company asks for money before anything is settled, that alone is disqualifying. The same caution applies to the medical credit cards offered at the billing window, which move the debt rather than reduce it.
Step 7: Use 501(r) as Leverage on a Nonprofit Hospital
Patients almost never use this one. Under Section 501(r)(6), a nonprofit hospital must make reasonable efforts to determine whether you qualify for its financial assistance policy before any “extraordinary collection action.” The IRS defines those to include selling your debt, reporting you to a credit bureau, requiring payment before providing medically necessary care, and anything requiring a legal process: liens, garnishment, seizing a bank account, or suing you.
The timing rules are concrete and quotable back at a billing office. IRS regulations set a 120-day notification period and a 240-day application period, both running from the first post-discharge billing statement. The hospital cannot start an extraordinary collection action for at least 120 days after that first bill, must give written notice plus a plain-language policy summary at least 30 days before starting one, and must suspend collection while a complete application is pending.
Two more points with teeth: a hospital stays accountable for the collection agencies and debt buyers it hands your account to, and a debt sale only escapes the extraordinary-collection-action rules if the sale agreement requires the buyer to recall the debt when you are found eligible. If nobody told you about the policy before a collector or a lawsuit appeared, saying “this looks like a 501(r)(6) problem” to the hospital’s patient financial services director changes the conversation.
Step 8: Chapter 7 Bankruptcy, the Route That Actually Discharges It
Medical debt is unsecured, which makes it among the most straightforwardly dischargeable debt in a Chapter 7 case. It is last here because it is the most consequential, not because it is exotic.
The court fee is $338, the amount posted by the US Bankruptcy Court for the District of Columbia: a $245 statutory filing fee plus, under Item 8 of the federal Bankruptcy Court Miscellaneous Fee Schedule effective December 1, 2023, a $78 administrative fee and a $15 trustee surcharge. (The older Chapter 7 Bankruptcy Basics page on uscourts.gov still lists the administrative fee at $75, a total of $335. The fee schedule controls, and courts post $338.) Debtors may pay in up to four installments, and under 28 U.S.C. 1930(f) the court may waive the fee entirely if income is below 150% of the poverty level. Attorney fees are separate and are the real cost for most people.
Filing triggers an automatic stay that stops collection calls, lawsuits, and wage garnishments immediately, and it stays on your credit report for up to 10 years. Talk to a bankruptcy attorney before deciding either way; many offer a free consultation, and the CFPB itself points people there as an alternative to paying a settlement company.
Comparing the Five Routes
| Route | Who qualifies | Cost to you | How long | Credit impact |
|---|---|---|---|---|
| Charity care | Income under the hospital’s threshold, often 200-400% FPL | $0 | 2 weeks to 3 months | None; bill written off |
| Undue / government programs | Under 4x FPL or debt over 5% of income, if your debt is in a purchased portfolio | $0; no application exists | Unpredictable; you are notified | Neutral or positive |
| Negotiated settlement | Anyone; leverage highest on old, sold debt | Settlement amount, possible 1099-C | 1 call to a few weeks | Paid medical collections are removed |
| 501(r) enforcement | Nonprofit-hospital patients never told about the policy | $0 | Weeks; collection suspended | Blocks or reverses adverse reporting |
| Chapter 7 bankruptcy | Passes the means test | $338 court fee (waivable) plus attorney fees | 3 to 6 months | Severe; up to 10 years |
The Bottom Line
Medical debt forgiveness is real, but it is almost never something you buy. The two routes that erase the most debt (charity care and third-party abolishment) cost the patient nothing, and one cannot be applied for at all. The routes that cost money are settlement, which you can run yourself in one phone call, and bankruptcy, a $338 court fee plus counsel.
Start with charity care. If that fails, validate the debt, find out who owns it, and settle it yourself knowing they likely paid pennies for it. If your bills are still current rather than in collections, a medical bill payment plan or our medical bill assistance programs guide will do more than any of this, and an itemized hospital bill is the cheapest way to find charges that were never owed. If the debt is a pharmacy balance rather than a hospital one, start with prescription assistance programs instead.