Sen. Sheldon Whitehouse [D-R.I.] and Rep. Steve Cohen [D-Tenn.] have introduced the Medical Bankruptcy Fairness Act of 2026, a bill that would carve out a new class of “medically distressed debtors” in the Bankruptcy Code and hand them a set of protections with significant implications for creditors, debt buyers, and collection operations.
Why it matters: The bill touches nearly every stage of the recovery lifecycle for medical debt, from how bankruptcies are processed to what shows up on a consumer’s credit report afterward. Most notably for the ARM industry, it would amend the Fair Credit Reporting Act to exclude any information related to a medically distressed debtor’s bankruptcy from consumer reports entirely.
Who qualifies: The bill defines a medically distressed debtor as someone who, in the three years before filing, incurred or paid out-of-pocket medical debt exceeding the lesser of 10% of adjusted gross income or $10,000. The definition covers medical debt incurred for the debtor, a dependent, or a nondependent parent, grandparent, sibling, child, grandchild, or spouse. It also sweeps in debtors who lost income due to their own illness, caregiving obligations, or a declared public health emergency, along with those who missed out on at least $10,000 in domestic support payments because of the obligor’s medical issues. Spouses of qualifying debtors are covered as well.
What the bill would do:
- Exempt medically distressed debtors from the Chapter 7 means test and the Chapter 13 disposable income requirement
- Waive the pre-filing credit counseling requirement
- Allow the discharge of student loans without a separate undue hardship showing
- Let debtors protect up to $250,000 in home equity, a burial plot, or a residential cooperative interest, overriding lower state exemption caps
- Keep the bankruptcy off consumer credit reports under the FCRA
Debtors seeking the designation would have to file a statement of medical expenses and declare under penalty of perjury that the expenses were not incurred to game the definition.
The big picture: The bill’s sponsors cite research suggesting Americans owe at least $220 billion in medical debt, affecting roughly 20 million people. Whitehouse has pushed versions of this legislation for years without passage, and with Republicans controlling the chamber, the bill faces long odds. But it signals that congressional Democrats intend to keep medical debt at the center of their consumer protection agenda, alongside ongoing fights over medical debt credit reporting at the state and federal levels.
