Medical Bankruptcy Fairness Act of 2026
- Sponsor
- Sen. Whitehouse, Sheldon [D-RI]
- Committees
- Judiciary Committee (primary)
- Last action
- Jul 14, 2026
Bottom line
The Medical Bankruptcy Fairness Act of 2026 aims to alleviate the financial burden of medical debt by offering specific, expanded bankruptcy relief to individuals and families facing significant health-related financial distress.
What it actually does
This bill amends the U.S. Bankruptcy Code to create a new category of "medically distressed debtors," providing them with enhanced bankruptcy protections. It redefines who qualifies for these protections based on significant medical debt, loss of income due to medical issues, or caregiving responsibilities. The bill waives certain administrative requirements, increases homestead exemptions, eases student loan dischargeability, and excludes medical bankruptcies from consumer credit reports for these debtors.
Proponents argue
Supporters argue that the current bankruptcy system does not adequately protect individuals overwhelmed by medical debt, often through no fault of their own. They contend that this bill provides a necessary safety net, preventing medical crises from leading to total financial ruin, protecting homes, and offering a fresh start to those whose financial hardship is primarily health-related. Proponents emphasize that it addresses a systemic issue where healthcare costs can quickly deplete savings and income, leading to unavoidable bankruptcy.
Opponents contend
Critics might argue that expanding bankruptcy protections, even for medical debt, could encourage irresponsible financial behavior or create loopholes that could be exploited. They may also raise concerns about the potential impact on creditors, including healthcare providers, who might face increased losses, potentially leading to higher costs for all consumers or reduced access to credit. Some might also argue that the bill could strain the bankruptcy system with more complex cases or that it is an indirect way to address healthcare cost issues rather than tackling them directly.
The bill is concise and its provisions are clearly stated, making it accessible for a reader to evaluate its core changes within a reasonable timeframe.
Section 1
Short Title
This section establishes the official short title of the Act as the "Medical Bankruptcy Fairness Act of 2026," which is how the bill will be commonly referred to and cited. This provides a clear and concise name for the legislation, aiding in its identification and discussion.
Supporters argue
A clear and concise short title helps in referencing and discussing the legislation, making it easier for the public and legal community to identify its purpose.
Critics contend
No specific opposition is typically raised against the naming of a bill.
Tradeoffs
N/A
Section 2(a), amending Section 101 of title 11
Definition of "Medical Debt" and "Medically Distressed Debtor"
This section introduces two new definitions into the Bankruptcy Code: "medical debt" (any debt from diagnosis, treatment, or prevention of injury/illness) and "medically distressed debtor." A debtor qualifies as "medically distressed" if, in the 3 years prior to filing, they incurred or paid significant medical debt (over 10% of adjusted gross income or $10,000 not covered by a third party), lost domestic support due to an obligor's medical issue, or experienced employment status changes (wage reduction, reduced hours, unemployment) due to their own or a dependent's/family member's medical condition, or a public health emergency. Spouses of such debtors also qualify.
Section 3(a), amending Section 522 of title 11
Increased Homestead Exemption for Medically Distressed Debtors
This section allows medically distressed debtors to exempt up to $250,000 in value for their primary residence (real or personal property, cooperative, or burial plot), regardless of whether they choose federal or state exemptions. This significantly increases the protection for a debtor's home, as the standard federal homestead exemption is typically much lower and state exemptions vary widely, preventing a medical crisis from leading to homelessness.
Section 4(a) and 4(b), amending Sections 707(b) and 1325(b)(1) of title 11
Waiver of Means Test and Best Efforts Test for Medically Distressed Debtors
This section exempts medically distressed debtors from two key administrative hurdles in bankruptcy. For Chapter 7, it waives the "means test" (Section 707(b)(2)), which typically determines if a debtor's income is too high to qualify for Chapter 7 liquidation. For Chapter 13, it waives the requirement that a debtor's plan commits all "projected disposable income" to payments (Section 1325(b)(1)(C)), often referred to as the "best efforts" test. This simplifies and broadens access to bankruptcy relief.
Section 5, amending Section 109(h)(4) of title 11
Exemption from Credit Counseling Requirement
This section exempts medically distressed debtors from the mandatory credit counseling requirement that typically precedes bankruptcy filing. This means they would not need to complete an approved budget and credit counseling course within 180 days before filing their petition, removing a procedural barrier and potential cost.
Section 6, amending Section 523(a)(8) of title 11
Easier Discharge of Student Loans for Medically Distressed Debtors
This section makes student loans dischargeable in bankruptcy for medically distressed debtors without requiring them to prove "undue hardship." Currently, student loans are generally non-dischargeable unless a debtor can meet a strict "undue hardship" test, which is notoriously difficult to satisfy. This provision significantly eases the path to discharging student loan debt for this specific group.
Section 7, amending Section 521 of title 11
Debtor Attestation of Medical Expenses
This section requires any debtor seeking relief as a "medically distressed debtor" to file a statement of relevant medical expenses. This statement must be declared under penalty of perjury, affirming that the medical expenses were not incurred solely for the purpose of qualifying as a medically distressed debtor. This serves as a safeguard against fraudulent claims.
Section 8, amending Section 605(a) of the Fair Credit Reporting Act (15 U.S.C. 1681c(a))
Exclusion of Medical Bankruptcies from Consumer Credit Reports
This section amends the Fair Credit Reporting Act to prevent information related to the bankruptcy of a "medically distressed debtor" from appearing on consumer credit reports. This means that a medical bankruptcy would not negatively impact a debtor's credit score or future access to credit, providing a true financial fresh start.