Medical Bankruptcy Fairness Act

Written by CFB Blogger. Posted in Blog

The Medical Bankruptcy Fairness Act, introduced by Senator Sheldon Whitehouse (D., R.I.), would let people expunge their student-loan debt via the bankruptcy process if they have also spent over $10,000 in medical bills during the three years preceding their bankruptcy filing. The bill has support from only two other lawmakers: Senator Elizabeth Warren (D., Mass.) and Senator Richard Durbin (D., Ill.). Although medical debt is normally dischargeable in bankruptcy, erasing student loan is almost impossible. A spokesman for Senator Whitehouse told Katy Stech, writing for the Bankruptcy Beat of The Wall Street Journal, “There’s no good reason to treat these [student] loans differently from other debt in bankruptcy.” According to Daniel Austin, a professor at Northwestern University’s School of Law, over half of the people who have recently filed bankruptcy would qualify. By Professor Austin’s estimate, over half of the people who file for bankruptcy have enough medical debt to qualify for the student loan discharge. Further research revealed that approximately 30% of people who file for bankruptcy with medical debt also hold student loans. Related research shows that at least 171,000 individuals and couples who filed for either Chapter 7 or Chapter 13 bankruptcy in 2013 would have been relieved of their student loans under Whitehouse’s proposal. Bankruptcy Beat continued saying that “Senator Whitehouse’s student loan relief is a new provision in a bill that’s several years old. In 2009, Whitehouse introduced the bill out of frustration for how people with big medical bills are being treated in bankruptcy. They still have to take credit counseling class (and pay for it), even though their debts mounted from health problems, not luxury vacations or other splurges. The bill waives that credit counseling requirement.” Whitehall’s bill also has a provision to help families keep their homes. “‘Medically distressed debtors could keep up to $250,000 worth of property through… a homestead exemption. The federal rule lets people keep only about $23,000 worth of property, meaning that a court-appointed official can try to sell properties worth more than that in an effort to repay the owner’s debt. (Many states offer higher homestead exemptions for their residents.)” A spokesman for the U.S. Department of Education, which backs nearly 90% of nation’s $1.2 trillion in student loan debt, did not comment on the proposal. Earlier versions of the bill got some attention, including the support of Elizabeth Edwards who wrote a joint op-ed for CNN.com before her death in 2010. The attorneys at Client First Bankruptcy have represented thousands of clients in their bankruptcy filings. If you are contemplating filing for a Chapter 7 or Chapter 13 personal bankruptcy due to piles of unpaid medical bills or other overwhelming debt, do not proceed without an experienced and knowledgeable bankruptcy attorney from Client First Bankruptcy at your side. For your free initial consultation, please call us toll-free at 800-383-6004; we answer our phone 8:30 a.m.-6:00 p.m. Central Time for your convenience. And please log onto www.clientfirstbankruptcy.com for important information about your personal bankruptcy anytime.