We can always count on Elizabeth Warren to tirelessly advocate for those that are struggling – whether it’s with student loans, money woes or medical issues. But a piece of legislation she recently proposed is tackling all three. Senate Bill 2471, known as the Medical Bankruptcy Fairness Act, is co-sponsored by Warren (D-MA) and fellow Democrat Sheldon Whitehouse (RI) and is aimed at making the bankruptcy process easier for those pushed into financial distress by medical costs.
Helping Medically Distressed Debtors
The proposed legislation spells out three descriptions for what is considered a “medically distressed debtor.” First, it can be someone that, within the three years before filing for bankruptcy, incurred medical debts for themselves, their spouse, dependent or immediate family member that were at least equal to the lesser of $10,000 or 10% of their adjusted gross income.
Second, it also includes people who weren’t paid alimony or child support of at least $10,000 because the person who was supposed to pay it has medical issues. Third, are those that have a change in employment status that has them earning less or had their hours cut or left them unemployed due to an injury, deformity or disease of the debtor themselves or caring for a dependent, spouse or immediate family member that was ailing. It also includes the spouse of anyone that meets one of these three definitions.
How Medical Bankruptcy Would Differ from Standard
Once the people that could use this modified bankruptcy are defined, here’s what would make it different from a standard bankruptcy. You could protect up to $250,000 in assets which is drastically higher than what’s available in any state for a bankruptcy. This means that medical debtors could shed their unaffordable medical bills without losing their home. This is huge. It would also waive the requirement for credit counseling for medical bankruptcies, relax the means test and would make it easier for medically distressed debtors to have their student loans discharged in bankruptcy.
Why This Bill Is Huge
Medical debts are a leading cause of bankruptcy, even for those with health insurance. 75% of consumers that become so overloaded with medical bills that they seek bankruptcy were insured but co-pays, co-insurance and non-covered procedures, treatments and other associated expenses overloaded even those with coverage. And for those without coverage, even a minor medical issue can quickly become financially catastrophic.
Senator Warren said, “This bill will provide some relief for families facing crushing medical debt and help them get back on their feet through a fairer bankruptcy process.” Her co-sponsor, Senator Sheldon Whitehouse said, “This legislation would make our bankruptcy system fairer for families who find themselves in financial straits through no fault of their own.”
Click here to read the entire text of Senate Bill 2471 and if you want to help this legislation, contact your Senators and tell them to get the Medical Bankruptcy Fairness Act out of committee, up for a vote and to vote YES!
To keep current on student loan legislative updates and other news, be sure to read our blog daily and sign up for our free student loan tool to keep track of all of your student loans in one easy dashboard and visualize how to deal with it better, explore repayment plans and a ton of other great futures.