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Senate Considers Bill to Change Bankruptcy Process for People With Medical Debt

October 21, 2009

As Long Beach consumer bankruptcy attorneys, we have seen problems with the 2005 bankruptcy reform bill since before it passed. That's why we were pleased to see an article from the Providence Journal Oct. 20 about a proposed federal bill that would reverse some of its most damaging effects for people who are driven bankrupt by medical debt. Sen. Sheldon Whitehouse, D-RI, has proposed a Medical Bankruptcy Fairness Act that would allow debtors to keep at least $250,000 worth of equity in their homes; waive credit counseling and the "means test" that limits who may file for Chapter 7; and allow debtors to delay paying attorney fees until after they complete the bankruptcy. Studies have found that medical debt is primarily responsible for 60% of all individual bankruptcies in the United States.

In support of the bill, a subcommittee of the Senate Judiciary Committee heard testimony from a Rhode Island couple who went bankrupt after their son was hospitalized for 13 months and underwent three surgeries for his cystic fibrosis. Kerry and Patrick Burns had health insurance, but it didn't cover all the needs of their son, Finnegan, who died this year at the age of 4 1/2. They also lost income when they took leave from their jobs to be with him; Kerry Burns eventually lost her job as a social worker. They drained their retirement accounts, sold belongings and eventually fell into default on their mortgage, enduring up to 60 calls a day from creditors. Kerry Burns told the senators that she found the required credit counseling portion of the bankruptcy process "demeaning and demoralizing," and that she had to borrow the money to file for bankruptcy.

Our San Bernardino individual bankruptcy lawyers support this effort to make bankruptcy a little easier on people who are driven there by medical problems beyond their control. Ideally, we would prefer a bill easing these requirements for all filers, particularly since research shows that the widespread abuses the reforms were meant to curb never existed in the first place. But as Elizabeth Edwards, another witness at the hearing, said, patronizing questions about managing money better are especially inappropriate for families driven into bankruptcy by a serious illness. Nobody chooses to get sick, lose their job because of illness or have essential health care coverage denied by a health insurance company.

At Howard Law LLP, we work every day with Californians who need help taking control of debt that is threatening to overwhelm their lives. Bankruptcy is not an easy choice, but our Murrieta personal bankruptcy attorneys can guide you through the legal and financial steps you must take to file. We can help clients choose between Chapter 13, in which they pay off debts over time, or Chapter 7, in which they sell off most of their assets and emerge more quickly. In either case, clients get immediate relief from the harassing calls and letters from debt collectors. If appropriate, we can also help clients resolve debts without bankruptcy through our debt settlement and mortgage loan modification practices.

If you're in debt so deeply that you don't believe you can ever pay it off, you should call Howard Law for a free, confidential evaluation of your circumstances. You can reach us toll-free at 1-800-872-5925 or send us a message anytime through our Web site.