A number of experts recently testified before members of the House Judiciary Committee's Commercial and Administrative Law subpanel regarding medical debt and its effect on debtors and bankruptcy filings. At issue was a proposed bill known as the Medical Bankruptcy Fairness Act, which, if passed into law, would make it possible for people with large medical bills to exempt certain property if they were forced to file for bankruptcy.

The House bill was introduced by Representative Carol Shea-Porter of New Hampshire last February. A similar bill was introduced in the U.S. Senate last August by Rhode Island senator Sheldon Whitehouse. If passed, the house bill would amend the bankruptcy code to allow debtors with medical debt to exempt up to $250,000 of the value of their home or their burial plot when filing for bankruptcy relief.

Offering testimony in support of the bill were U.S. Bankruptcy Judge Cecelia Morris and a law professor from the Franklin Pierce Law Center, Peter Wright. Both offered testimony based on their personal experiences with those filing for bankruptcy and those finding themselves with seemingly insurmountable medical debt.

According to Wright, many people all over the country live paycheck to paycheck and significant illnesses and the resulting medical bills sometimes make it impossible for them to recover and pay the bills that need to be paid.

Judge Morris added that medical bills and credit cards are often related because many individuals cannot pay for medical care on their own and resort to using credit cards to pay for needed care. Consequently, the debtors find themselves unable to get out from under the credit cards because they initially could not afford their necessary medical treatment.

One critic of the proposed legislation was Aparna Mathur, a resident scholar at the American Enterprise Institute. In his testimony he questioned the relation of medical debts to bankruptcy and talked about the potential for unintended consequences such as allowing credit card debtors to file bankruptcy as medical debtors when, in fact, their debts are not related to medical bills.

These bills are almost sure to be further debated in the House and Senate and we will try to provide updates when more information is available.

Related Resources:

Bankruptcy hearing reveals competing views on medical debt