S. 4972: Medical Bankruptcy Fairness Act of 2026

This bill would create special bankruptcy rules for people whose finances have been significantly affected by medical costs or medical-related job loss. It would add a new category in bankruptcy law called a medically distressed debtor and give those debtors several added protections and exceptions.

Who would qualify

The bill defines medical debt broadly as debt tied to diagnosis, treatment, cure, mitigation, or prevention of illness or injury. A person could qualify as a medically distressed debtor if, during the 3 years before filing bankruptcy, they:

• Incurred or paid medical debt for themselves or certain family members that was not covered by a third party, and that amount was more than the lesser of:
  • 10% of their adjusted gross income, or
  • $10,000;
• Had certain domestic support-related circumstances tied to a medical issue that would meet the same test; or
• Had a drop in pay, work hours, or became unemployed because of their own illness or injury, care for an ill family member, or a declared emergency related to a public health crisis.

The spouse of someone who meets these criteria would also qualify.

Bankruptcy-related changes

For medically distressed debtors, the bill would make several changes to bankruptcy procedures:

• Home and burial property protection: It would allow qualifying debtors to protect up to $250,000 in value of certain property, including a home, cooperative housing used as a residence, or a burial plot, under a special exemption rule.
• Chapter 7 eligibility: It would exempt these debtors from one of the chapter 7 “means test” restrictions that can block certain people from using chapter 7 bankruptcy.
• Chapter 13 plan rules: It would allow these debtors to use a special exception when courts determine disposable income for a repayment plan.
• Credit counseling: It would waive the usual credit counseling requirement for these debtors in the same way some other exceptions already exist in bankruptcy law.
• Student loans: It would make medically distressed debtor status an additional basis that can be considered for discharging student loan debt as an undue hardship.

Filing requirement

A debtor claiming this status would have to file a statement of medical expenses and declare under penalty of perjury that the expenses were not incurred just to qualify for the special bankruptcy status.

Credit reporting

The bill would bar consumer reporting agencies from including information about the bankruptcy of a medically distressed debtor in a consumer report.

When it would apply

The bill would take effect on the date it is enacted and would apply only to bankruptcy cases filed on or after that date.

Relevant Companies

None found.