Medical Bankruptcy Fairness Act

The new bankruptcy reform bill would make a simple, but far-reaching, change to the bankruptcy code by simply eliminating the different treatment of student loan debt in bankruptcy. The bill’s proponents argue that these measures are necessary in light of the financial ruin that many American families are facing as a result of the pandemic and associated recession.

“This public health crisis is pushing families to the brink, especially those with hospital bills piling up,” said Senator Elizabeth Warren, another lead co-sponsor. “Now more than ever, we need to reform our bankruptcy system to help struggling individuals and families regain their financial footing."

Democratic senators have proposed similar bills in the past, but the proposals went nowhere in the Republican-controlled Senate. Now, with Democrats holding narrow majorities in both chambers of Congress, this bill has a better chance of passing, but it is unclear if it would garner sufficient bipartisan support to overcome a Republican filibuster.

The Department of Education estimates that about 7.5 million borrowers are in default on their federal student loans. And when the CARES Act’s suspension of regular payments also expires on September 30, forcing millions more to enter repayment, that number may only increase.



Pending legislation


Medical Bankruptcy Fairness Act of 2021

Effective timeline


American workers and individuals would find much financial relief if this bill is enacted, there is still much to deliberate in congress over how this bill will effect financial institutions with regard to outstanding debts, but relief maybe available through government subsidies to those institutions.

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