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Congress Hears Mixed Testimony on Need for Medical Bankruptcy Legislation

July 20, 2010

Last fall, we wrote about the Medical Bankruptcy Fairness Act, a bill in Congress that would change how the bankruptcy courts treat people who are driven into bankruptcy by high medical bills. Our Ontario personal bankruptcy attorneys were pleased to see that the bill is getting some attention, at least in the House of Representatives. According to a July 15 post to The Hill's Healthwatch blog, experts testified before the House Judiciary Committee's Commercial and Administrative Law subpanel that day about the desirability of such a change. The subpanel heard from U.S. Bankruptcy Judge Cecelia Morris and Professor Peter Wright of the Franklin Pierce Law Center in New Hampshire, who disagreed strongly with another speaker, Aparna Mathur of the American Enterprise Institute.

The House version of the bill was introduced by Rep. Carol Shea-Porter, a Democrat from New Hampshire, and five co-sponsors. It would create different rules for bankruptcy filers who paid more than $10,000 or 25% of their income in medical bills for any year in the three years before filing, or who lost a substantial amount of income because of a medical problem. These "medically distressed" debtors would be able to protect up to $250,000 more in real estate property from the bankruptcy, and would have a better chance of qualifying for Chapter 7 bankruptcy. At the hearing, Morris, the bankruptcy judge, said debtors with medical problems get into credit card debt because it's more important for them to get needed care than to worry about money. Mathur, from the American Enterprise Institute, said the bill is so broad that debtors can claim any credit card debt as medical debt.

Mathur also argued that the problem of medical debt driving bankruptcy is overstated, citing his own study saying that just 2.4% of filers reported any medical debt once medical debt was clearly separated from credit card debt. Our Whittier consumer bankruptcy lawyers believe this is a false distinction. Bankruptcy is not fun, financially or emotionally, and in our experience, the vast majority of filers do everything they can to avoid it. In the case of medical debt, that means families will use credit cards or home equity lines of credit and drain their investments to pay their medical bills, even when it's clear that they still won't have enough to pay all for the care they need. That's why other kinds of debt are impossible to separate from medical debt without interviews with debtors. The only studies we know of that used interviews to examine medical bankruptcy are from Harvard University, which in 2005 found that medical debt was cited in about half of bankruptcies -- not 2.4%.

Howard Law PC is a bankruptcy law firm based in Orange County and representing people throughout California who are considering bankruptcy as a solution to their overwhelming debt. Many of our clients come to us reluctantly, feeling like they have failed because they are seeking a bankruptcy. In fact, bankruptcy may be your best move under certain conditions, because it allows you to shed obligations that you know you can never meet and protect certain assets from your creditors. Our Moreno Valley individual bankruptcy attorneys start every bankruptcy case by examining whether our clients truly need a bankruptcy, and if so, which type of bankruptcy is appropriate for their individual situations. We stand by our clients' sides throughout the process, including handling matters outside bankruptcy court, such as dealing with creditors and counseling clients on the tax and credit effects of the bankruptcy.

Howard Law offers free, confidential case evaluations, so you risk nothing by speaking to us about your rights and your case. To set one up, please contact us through the Internet or call 1-800-872-5925 today.