Medical Debt Bankruptcy Exception Being Considered
 

Posted on Wednesday (October 21, 2009) at 6:00 pm to Bankruptcy Legislation Bankruptcy Means Test

At various times this year, Congressional committees have pondered the idea of making it easier for consumers who are overwhelmed with medical debt to file for bankruptcy.
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I previously discussed this in: Special Bankruptcy Protection on the Way for Consumers with High Medical Debts and Congress Considers Amending Bankruptcy Code to Make it Easier for Consumers to Discharge Medical Debt .

Yesterday, the Senate Judiciary Subcommittee on Administrative Oversight and the Courts held a hearing on proposed legislation to make it easier to file for bankruptcy relief for those consumers whose medical debts are the primary cause of their financial difficulty. The legislation is being sponsored by subcommittee chair Senator Sheldon Whitehouse (D-R.I.).

The hearing questioned whether the new bankruptcy laws adopted in 2005 make it unreasonably difficult for consumers burdened with medical debt to get a fresh new financial start.

One of the key issues is determining what consumers would be eligible for relief.

The other key issue concerns what the relief would be. Here’s what was being discussed:
A) the means test would be waived
B) the credit counseling requirements would be waived
C) there would be a national homestead exemption of $250,000 for these debtors
D) these debtors would be permitted to pay some of their attorney’s fees after filing

Written by Craig D. Robins, Esq.

http://longislandbankruptcyblog.com/...on-considered/

Wow. Now you tell me. 'Hub

Oh how I wish medical debt would have been taken into consideration we filed in 2006. Nobody cared back then how we got so far into debt. I only had two complicated pregancies and 7 surgeries plus a chronic illness. Add my husband's hospitalizations and children's illnesses (thankfully they didn't have anything major). Combine that with three job losses and there you have it--the big "Scarlet B."

Oh well, we've survived and paid out of the Chapter 13 early after inheriting some money from one of my relatives.

Hope the greedy jerks at the CC companies are happy.

jane

Here's the text.

SEC. 2. DEFINITIONS.
(a) In General- Section 101 of title 11, the United States Code, is amended--


(1) by inserting after paragraph (39A) the following

'(39B) The term 'medical debt' means any debt incurred directly or indirectly as a result of the diagnosis, cure, mitigation, treatment, or prevention of injury, deformity, or disease, or for the purpose of affecting any structure or function of the body.

'(39C) The term 'medically distressed debtor' means a debtor who, in any consecutive 12-month period during the 3 years before the date of the filing of the petition--

'(A) incurred or paid medical debts for the debtor or a dependent of the debtor, or a nondependent member of the immediate family of the debtor (including any parent, grandparent, sibling, child, grandchild, or spouse of the debtor), that were not paid by any third party payor and were in excess of the lesser of-

'(i) 10 percent of the debtor's adjusted gross income (as such term is defined under section 62 of the Internal Revenue Code of 1986); or

'(ii) $10,000;

'(B) was a member of a household in which 1 or more members (including the debtor) lost all or substantially all of the member's domestic support obligation income, taking into consideration any disability insurance payments, for 4 or more weeks, due to a medical problem of a person obligated to pay such domestic support; or


'(C) experienced a downgrade in employment status that correlates to a reduction in wages or work hours or results in unemployment, to care for an ill, injured, or disabled dependent of the debtor, or an ill, injured, or disabled nondependent member of the immediate family of the debtor (including any parent, grandparent, sibling, child, grandchild, or spouse of the debtor), for not less than 30 days.'.

(b) Conforming Amendments- Sections 104(b)(1) and 104(b)(2) of title 11, the United States Code, are each amended by inserting '101(39C)(A)(ii),' after '101(19)(A)'.

SEC. 3. EXEMPTIONS.
(a) Exempt Property- Section 522 of title 11, the United States Code, is amended by adding at the end the following:

'(r) For a debtor who is a medically distressed debtor, if the debtor elects to exempt property-

'(1) listed in subsection (b)(2), then in lieu of the exemption provided under subsection (d)(1), the debtor may elect to exempt the debtor's aggregate interest, not to exceed $250,000 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor; or

'(2) listed in subsection (b)(3), then if the exemption provided under applicable law specifically for property of the kind described in paragraph (1) is for less than $250,000 in value, the debtor may elect in lieu of such exemption to exempt the debtor's aggregate interest, not to exceed $250,000 in value, in any such real or personal property, cooperative, or burial plot.'.

(b) Conforming Amendments- Sections 104(b)(1) and 104(b)(2) of title 11, the United States Code, are each amended by inserting '522(r),' after '522(q),'.

SEC. 4. DISMISSAL OF A CASE OR CONVERSION TO A CASE UNDER CHAPTER 11 OR 13.

Section 707(b) of title 11, the United States Code, is amended by adding at the end the following:

'(8) No judge, United States trustee (or bankruptcy administrator, if any), trustee, or other party in interest may file a motion under paragraph (2) if the debtor is a medically distressed debtor.'.

SEC. 5. CREDIT COUNSELING.

Section 109(h)(4) of title 11 United States Code, is amended by inserting 'a medically distressed debtor or' after 'with respect to'.

SEC. 6. NONDISCHARGEABILITY OF CERTAIN ATTORNEYS FEES.

Section 523(a) of title 11, United States Code, is amended--

(1) in paragraph (18), by striking 'or' at the end;

(2) in paragraph (19), by striking the period at the end and inserting '; or'; and

(3) by inserting after paragraph (19) the following:


'(20) incurred by a debtor relating to attorneys fees generated as result of the debtor's filing of a petition under chapter 7.'.


SEC. 7. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect on the date of the enactment of this Act.

(b) Application of Amendments- The amendments made by this Act shall apply only with respect to cases commenced under title 11 of the United States Code on or after the date of the enactment of this Act.


SEC. 8. ATTESTATION BY DEBTOR.

Any debtor who seeks relief as a medically distressed debtor in accordance with the amendments made by this Act shall attest in writing and under penalty of perjury that the medical expenses of the debtor were genuine, and were not specifically incurred to bring the debtor within the coverage of the medical bankruptcy provisions, as provided in this Act and the amendments made by this Act.

http://www.opencongress.org/bill/111-s1624/text

A BK is little help for medical debt. In todays world, your paying huge premiums on lower wages and all other prices are up to on necessities. When you on the edge it takes little to set you over. So, here is an example of what I mean. You living on the edge, and you end up having to have dental surgery that ends up being the removal of three teeth and removing the infected tissue in your gum. You happen to have to work after this is done, so you also have to pay for a denture as the cheapest option. You dental insurance today pays 50% on this sort of thing, up to $1,000.00. Gosh, a whole 1,000... Then, you spouse ends up with two cracked teeth and you get to repeat the process, while you paying 27 and 22 per month for your crappy dental policy. Over the past few months you spouse was laid off on top of it and is earning very little so you try a short sale with WF who loses you paperwork 3 times and your realtors 3 times so your buyer walks, you tennant moves out and now you have two house payments. You are under total stress now, just hoping nothing else goes wrong, an suddenly you 3 year old water heater goes out and will not re-light in the middle of February another bill. You stop taking your blood pressure meds because your new doctor will not give you a refill without a visit every three months and you can't afford him every three months. Suddenly your spouse has an attack that looks like it could be his heart... and he refuses to go in. He has another attack and goes into a walk in clinic who then runs tests on him, and sends him to a DR who sees him a week later. This DR sends him for another test a week later, and the results a week later are not conclusive so we go for another test a week later again of course so now we are in to 5 weeks or so and we have a drug to slow down our heart rate, and a inhaller for COPD. So, you file a BK because you are broke from paying 260.00 per months for a crappy 80/20 plan in the state of MO with the lowest wages on the planet next to AL. Now, comes the real fun... what happens next time? You can not file again for a while, like you can plan better now that the slate is wiped clean? And how do you do that with low wages and no way to save much on and no jobs out there for older people? What if in one year one of us gets sick again and maybe has a heart attack and runs up bills of 200,000.000 on our great 80/20 plan.. who can pay those bills? Add that to maybe another broken tooth, or car repairs or a roof leak... what is the answer? What do you do? Do they then take everything and garnish your wages and continue to pay upper mgmt so they can invest or buy BMW's while others starve or have no healthcare? Is that the humanity of America? Interesting, I can see the American dream fading for most.

It would be nice if they reduced the time between filings...though I bet the medical industry wouldn't like that. God I hope they pass this soon...I could really use it.

I feel like I've been playing the do whatever it takes to stay healthy game so long I'm not sure what I'd do with good health insurance or this clean slate I'm supposed to be getting soon. Just staying as judgement proof as possible is the most important thing financially in this country - rich or poor.

It is sad that in a nation as great as ours we have allowed the most crooked individuals into government office that climb into bed with the thieves that now run businesses. It makes me ill everyday when I read how some idiot is making a ton of money by exporting our jobs, cutting our wages and increasing their own. BOA would be a fine example of how a great company run by a college educated idiot who was making far too much to do a job the village idiot could have done better. Anyone can run a business in good times, keeping it afloat in the bad times without sinking everyone else around you and laying off your employees is the sign of good leadership and someone worthy of larger incomes. I have met people brighter with 3rd grade educations, course I have met a lot of smart people with all sorts of educations. I hope things do get better in the medical world. Right now we are all paying for all of those that can not afford to pay,for ourselves, and for those with cadillac plans we are paying for them too. And our wages are falling... we can not afford it. The once greatest nation in the world with fearless people has turned into a nation that can not even build its own cars, that has the attitude of I HAVE MINE, and that fight bases on religion or politics instead of seeing our real problems are that our government has been bought up by Wall Street.

Opps.. for got to mention that when we can not pay and we file, someone elses costs go up including our own in the future. It is out of control and soon no one will be able to afford it.

It would be awesome if they couldn't get garnishments for medical debt in any state or have it effect credit scores (not sure if we already have that).

But yeah removing liability to pay does't help the overall problem...

This is why as soon as this is over, I am heading overseas. The American dream is now literally a dream for most. While I was researching a number of countries, I was shocked to see just how high the standard of living is for many in other countries. What you described above is certainly not the norm in a number of countries.

I will also start with a brand new credit profile overseas :D

20% of $200,000,000 is only $40 Million. Pocket change. :blink:

These posts reflect a lot of anger. Bankruptcy is designed to be a fresh start. Harboring such negativity isn't really starting fresh.

This country has plenty of humanity. No citizen in this country has to suffer. There are programs everywhere for anything that ails one.

Good luck to you.

I tend to agree with Ohiofiler.
I'm a glass is half full kinda guy. The reason I posted the article was, to let people know that maybe {and it's a big maybe-doubt it'll pass} if you do have a home with a lot of equity and get sick, you can bk those debts and keep the house. If it does become law, it'll be a useful bk preplanning tool for many.

Bk is not much help unless, you can figure out a way to improve your situation post bk. Filing bk itself is easy. It's what happens next that's hard.

When we discharge medical debt, it only screws the hospitals and doctors. Once again, the insurance companies lose nothing. When a hospital or doctor saves someone's life, the last thing I want to do is screw them over.

Medical debt is why a public option is imperative in this country. Rather than everyone else losing, it's about time the insurance companies lose.

I feel for the doctors but what makes me mad are the hospitals.

I was hospitalized recently and all the doctors, lab work, etc those bills were reasonable. I didn't get any "$200 for a band-aid" bill or anything funny. Totally payable if I hadn't lost my job and I would have been happy to pay.

But the hospital itself charged me $20k for one night. Huh? Just $20k for being there? That's one expensive hotel stay...

Not a chance on this. They are doing this so that doctors will support this ghastly health care bill and they'll take this off the table.

Your government at work... bunch of crooks.