Medical Bankruptcy Fairness Act of 2021
Bill: S.146 | Sponsor: Sen. Whitehouse, Sheldon (D-RI)
Policy area: Finance and Financial Sector

Summary:
Medical Bankruptcy Fairness Act of 2021
This bill allows medically distressed debtors to exempt certain property from their estates in bankruptcy, which allows them to retain ownership of such property. Specifically, a medically distressed debtor may exempt up to $250,000 of the debtor's interest in (1) specified real or personal property that the debtor or debtor's dependent uses as a residence, or (2) a burial plot for the debtor or debtor's dependent.
The bill also waives certain administrative and procedural requirements for a medically distressed debtor.
Additionally, the bill allows a medically distressed debtor to discharge in bankruptcy debts for certain education loans.
A debtor who seeks relief as a medically distressed debtor must attest in writing that the debtor's medical expenses are genuine and were not incurred to bring the debtor within the meaning of a medically distressed debtor under this bill.

To amend title 11, United States Code, to provide bankruptcy 
 protections for medically distressed debtors, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medical Bankruptcy Fairness Act of 
2021''.

SEC. 2. DEFINITIONS.

    (a) In General.--Section 101 of title 11, United States Code, is 
amended--
            (1) by inserting after paragraph (39A) the following:
            ``(39B) The term `medical debt' means any debt incurred 
        voluntarily or involuntarily--
                    ``(A) as a result of the diagnosis, cure, 
                mitigation, or treatment of injury, deformity, or 
                disease of an individual; or
                    ``(B) for services performed by a medical 
                professional for the prevention of disease or illness 
                in an individual.
            ``(39C) The term `medically distressed debtor' means--
                    ``(A) a debtor who, during the 3-year period 
                preceding the date of the filing of the petition--
                            ``(i) incurred or paid aggregate medical 
                        debt for the debtor, a dependent of the debtor, 
                        or a nondependent parent, grandparent, sibling, 
                        child, grandchild, or spouse of the debtor that 
                        was not paid by any third-party payor and was 
                        greater than the lesser of--
                                    ``(I) 10 percent of the adjusted 
                                gross income (as such term is defined 
                                in section 62 of the Internal Revenue 
                                Code of 1986) of the debtor; or
                                    ``(II) $10,000;
                            ``(ii) did not receive domestic support 
                        obligations, or had a spouse or dependent who 
                        did not receive domestic support obligations, 
                        of at least $10,000 due to a medical issue of 
                        the individual obligated to pay that would 
                        cause the obligor to meet the requirements 
                        under clause (i) or (iii), if the obligor was a 
                        debtor in a case under this title; or
                            ``(iii) experienced a change in employment 
                        status that resulted in a reduction in wages, 
                        salaries, commissions, or work hours or 
                        resulted in unemployment due to--
                                    ``(I) an injury, deformity, or 
                                disease of the debtor;
                                    ``(II) care for an injured, 
                                deformed, or ill dependent or 
                                nondependent parent, grandparent, 
                                sibling, child, grandchild, or spouse 
                                of the debtor; or
                                    ``(III) the national emergency 
                                declared by the President under the 
                                National Emergencies Act (50 U.S.C. 
                                1601 et seq.) with respect to the 
                                coronavirus disease 2019 (COVID-19) or 
                                another emergency declared by a 
                                Federal, State, or local official 
                                relating to a public health crisis; or
                    ``(B) a debtor who is the spouse of a debtor 
                described in subparagraph (A).''.
    (b) Conforming Amendments.--Section 104 of title 11, United States 
Code, is amended--
            (1) in subsection (a), in the matter preceding paragraph 
        (1), by inserting ``101(39C)(A),'' after ``101(19A),''; and
            (2) in subsection (b), by inserting ``101(39C)(A),'' after 
        ``101(19A),''.

SEC. 3. EXEMPTIONS.

    (a) Exempt Property.--Section 522 of title 11, United States Code, 
is amended by adding at the end the following:
    ``(r)(1) If a medically distressed debtor exempts property listed 
in subsection (b)(2), the debtor may, in lieu of the exemption provided 
under subsection (d)(1), elect to exempt the aggregate interest of the 
debtor, not to exceed $250,000 in value, in property described in 
paragraph (3).
    ``(2) If a medically distressed debtor exempts property listed in 
subsection (b)(3) and the exemption provided under applicable law for 
the kind of property described in paragraph (3) is for less than 
$250,000 in value, the debtor may elect to exempt the aggregate 
interest of the debtor, not to exceed $250,000 in value, in any such 
property.
    ``(3) The property described in this paragraph is--
            ``(A) real property or personal property that the debtor or 
        a dependent of the debtor uses as a residence;
            ``(B) a cooperative that owns property that the debtor or a 
        dependent of the debtor uses as a residence; or
            ``(C) a burial plot for the debtor or a dependent of the 
        debtor.''.
    (b) Conforming Amendments.--Section 104 of title 11, United States 
Code, is amended--
            (1) in subsection (a), in the matter preceding paragraph 
        (1), by inserting ``522(r),'' after ``522(q),''; and
            (2) in subsection (b), by inserting ``522(r),'' after 
        ``522(q),''.

SEC. 4. WAIVER OF ADMINISTRATIVE REQUIREMENTS.

    (a) Case Under Chapter 7.--Section 707(b) of title 11, United 
States Code, is amended by adding at the end the following:
            ``(8) Paragraph (2) does not apply in any case in which the 
        debtor is a medically distressed debtor.''.
    (b) Case Under Chapter 13.--Section 1325(b)(1) of title 11, United 
States Code, is amended--
            (1) in subparagraph (A), by striking ``or'' at the end;
            (2) in subparagraph (B), by striking the period at the end 
        and inserting ``; or''; and
            (3) by adding at the end the following:
                    ``(C) 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 ``apply with 
respect to''.

SEC. 6. STUDENT LOAN UNDUE HARDSHIP.

    Section 523(a)(8) of title 11, United States Code, is amended by 
inserting ``the debtor is a medically distressed debtor, or'' before 
``excepting''.

SEC. 7. ATTESTATION BY DEBTOR.

    Section 521 of title 11, United States Code, is amended by adding 
at the end the following:
    ``(k) If the debtor seeks relief as a medically distressed debtor, 
the debtor shall file a statement of medical expenses relevant to the 
determination of whether the debtor is a medically distressed debtor, 
which shall declare under penalty of perjury that such medical expenses 
were not incurred for the purpose of bringing the debtor within the 
meaning of the term `medically distressed debtor'.''.

SEC. 8. 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 
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, United 
States Code, on or after the date of enactment of this Act.
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