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On February 2, 2021, Democratic Sens. Whitehouse, Brown, Blumenthal, Baldwin, and Warren introduced the Medical Bankruptcy Fairness Act of 2021. This Act resembles bankruptcy reform bills that the senators introduced in prior years, however, it does contain an addition that would fundamentally change student loan debt discharge in bankruptcy for the short term. In previous years, the bill sought to create a special category of debtors labeled as “Medically Distressed Debtors.” This type of debtor includes anyone who, in the three year period prior to filing bankruptcy, incurred medical debt greater than 10% of their adjusted gross income. Once established as a Medically Distressed Debtor, that person receives special protections with regard to retaining residential equity, is not required to meet certain administrative and financial counseling requirements other debtors must complete, and can discharge student loans wi
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Democratic senators have revived a bill aimed at providing an easier path into bankruptcy for Americans suffering financial hardship stemming from COVID-19. The Medical Bankruptcy Fairness Act (the “Proposed Act”) has been unsuccessfully introduced several times previously but with the recent change of control in the Senate and the election of President Biden, many observers feel confident that the bill now has its first legitimate chance to become law. If enacted, the Proposed Act will not only make it less administratively burdensome to file bankruptcy for certain filers but will also provide additional benefits not currently available to other filers.