As reported in Law360, a group of Democratic senators proposed new legislation that would provide relief to individual debtors who file for bankruptcy due to medical costs or who have lost their jobs and health insurance. The Medical Bankruptcy Fairness Act of 2021 was proposed by Sen. Sheldon Whitehouse (D-R.I.) and co-sponsored by Sens. Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Tammy Baldwin (D-Wis.), and Richard Blumenthal (D-Conn.).
This proposed law would streamline bankruptcy procedures for individual debtors whose financial troubles were caused by medical debt or public health-related shutdowns. Specifically, the bill would eliminate a requirement that debtors undergo credit counseling when they file for bankruptcy, which Sen. Whitehouse said makes little sense for people seeking court protection because of unanticipated medical costs that are largely out of their control. It also would significantly expand the dischargeability of student loan debt, which currently requires a debtor to pass a high bar of hardship to obtain. An increase in the protected amount of home equity to $250,000 for an individual debtor is also included in the proposal. Whitehouse has proposed similar legislation at least three times, with measures introduced in 2014, 2016 and most recently in July 2020 failing to come to a vote in the Senate. Warren was a co-sponsor of all three of the previous efforts.