Luján, Colleagues Reintroduce Bill to Offer Relief to Americans Facing Medical Bankruptcy

Washington, D.C. – U.S. Senators Ben Ray Luján (D-N.M.), Sheldon Whitehouse (D-R.I.), Richard Blumenthal (D-CT), Elizabeth Warren (D-Mass.), Peter Welch (D-VT), and Tammy Baldwin (D-Wisc.) reintroduced legislation designed to ease the burden on Americans forced into bankruptcy because of unforeseen medical expenses. The Medical Bankruptcy Fairness Act of 2024 reforms the bankruptcy process to alleviate the strain on debtors and make the bankruptcy court system work better for Americans. 

“Far too many families face crippling medical debt that force them into bankruptcy and make it more difficult to make ends meet – all just to receive care,” said Senator Luján. “Medical debt plagues too many families and forces them to cut spending on necessities and take on additional debt. That’s why I’m proud to join my colleagues and introduce the Medical Bankruptcy Fairness Act to ease the financial burden on medical debt and give families and individuals a fair chance at getting back on their feet.”

“No one should have to worry about being one accident, injury, or diagnosis away from losing their home,” said Senator Whitehouse. “Our legislation would introduce a common-sense dose of compassion to reduce the financial burden of medical emergencies and help Americans get back on their feet.”

“The vast majority of bankruptcies are tied to medical debt – and that was true even before a pandemic where millions of Americans lost their jobs and were kicked off their employer’s health insuranc1e plan. Our legislation helps ease the burden for Americans hit with unforeseen medical costs and then forced into financially treacherous, anti-consumer bankruptcy proceedings,” said Senator Blumenthal.

“Medical debt is a major contributor to the national health care crisis. In Vermont, nearly 60,000 people regularly cut spending on food and deplete their savings to pay their medical debts–it’s outrageous,” said Senator Welch. “Our legislation takes steps to alleviate the burden of medical bills and provides much-needed relief to folks struggling to manage medical debts.”

“No American should be forced to choose between paying their hospital bill and keeping a roof over their heads,” said Senator Baldwin. “This legislation will help families who are between a rock and a hard place get through their financial hardships.”

Unlike many other debts, medical debt is involuntary, unexpected, and can grow at a rapid rate. People with medical debt report cutting spending on food, spending down their savings to pay for medical bills, borrowing money from friends or family members, or taking on additional debts. 

The Medical Bankruptcy Fairness Act would create a more accommodating bankruptcy process for Americans forced into bankruptcy due to medical debt or who have lost their jobs due to a public health-related shutdown. Specifically, the bill would:

1. Waive procedural hurdles like credit counseling that make little sense for those pushed into bankruptcy through no fault of their own;

2. Permit the discharge of student loans, which currently cannot be erased in bankruptcy for most debtors; and

3. Provide families a greater chance of keeping their homes by allowing the retention of at least $250,000 of home equity.

According to bankruptcy experts, medical debt remains a leading cause of personal bankruptcy filings in the United States. For people and families with limited assets, even a relatively small unexpected medical expense can be unaffordable. For people with significant medical needs, medical debt can pile up over time. An analysis of recent Census data suggests Americans owe at least $220 billion in medical debt, with 20 million people (nearly 1 in 12 adults) affected.

The Medical Bankruptcy Fairness Act is endorsed by the National Association of Consumer Bankruptcy Attorneys and the National Association of Consumer Advocates. 

Full text of the bill is available here and summary of the bill is here.

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