Sponsors (6)
The bill makes it substantially easier for people with large medically related debts to obtain bankruptcy relief and protect key assets and reputations, at the cost of greater financial losses for creditors and providers, more legal and administrative complexity, and potential higher borrowing costs or shifted taxpayer burdens.
People with large medically related bills (patients, low-income individuals, people with disabilities) will find it easier to obtain bankruptcy relief because the bill creates a 'medically distressed debtor' category with qualifying criteria and exempts qualifying debtors from the Chapter 7/13 means tests.
Homeowners and families facing major medical costs (patients, low-income homeowners) can protect up to $250,000 of equity in a home, cooperative interest, or burial plot from creditors in bankruptcy, reducing the risk of housing loss.
Consumers who file as medically distressed (low-income individuals and people with serious medical debt) will not have that bankruptcy information appear on their credit reports, helping them obtain credit, loans, housing, and employment more easily and reducing stigma.
Hospitals, medical providers, and creditors may face higher uncompensated-care losses and reduced recoveries (and those costs could be passed on to consumers, insurers, or taxpayers) because more medically related debts may be discharged.
Broader eligibility (including means-test exemptions) and an undefined 'medically distressed' category could lead to increased bankruptcy filings, strategic use of the designation, and more litigation, reducing recoveries for creditors and creating uncertainty for the bankruptcy system.
The bill contains legal ambiguities (e.g., a cross-reference to a repealed definition of 'adjusted gross income' and missing amendment text), which could prompt litigation and leave debtors and courts uncertain about income calculations and other key rules.
Based on analysis of 9 sections of legislative text.
Defines "medically distressed debtor," waives means tests for qualifying debtors, permits up to $250K homestead exemption, requires sworn medical expense statements, and prevents credit reporting of those bankruptcies.
Official title: Amend title 11, United States Code, to provide bankruptcy protections for medically distressed debtors, and for other purposes.
Introduced July 14, 2026 by Sheldon Whitehouse · Last progress July 14, 2026
Creates a new "medically distressed debtor" category for bankruptcy law and gives people with qualifying medical-related financial hardship stronger protections and easier access to relief. It changes exemptions, waives means-test requirements for Chapter 7 and Chapter 13 for qualifying debtors, requires a sworn medical-expense statement to claim the status, and bars consumer reporting agencies from including bankruptcies of medically distressed debtors in consumer reports. The bill also amends other bankruptcy provisions (some insertion text is missing in the provided draft), and applies only to bankruptcy cases filed on or after enactment. Two provisions in the excerpt (possible changes to pre-bankruptcy credit counseling and to student loan nondischargeability) are incomplete in the text provided, leaving uncertainty about their final effects.