Key Takeaways
- • Representative Steve Cohen introduced H.R. 9670, the Medical Bankruptcy Fairness Act of 2026, on July 14, 2026, creating a new "medically distressed debtor" category in federal bankruptcy law to protect individuals whose finances have been severely impacted by medical costs or medical-related income loss.
- • Qualifying debtors must meet one of three criteria within three years prior to filing: incur uncovered medical debt exceeding 10% of adjusted gross income or $10,000; have $10,000+ in domestic support obligations affected by a medical issue; or experience job/income loss due to personal illness, family caregiving, or a declared emergency.
- • The bill would relax key bankruptcy rules for medically distressed debtors, including waiving certain Chapter 7 dismissal provisions based on income levels, creating additional Chapter 13 repayment plan exceptions, and exempting these debtors from pre-filing credit counseling requirements.
- • In certain cases, medically distressed debtors could protect up to $250,000 in property value during bankruptcy proceedings, substantially higher than standard exemption levels.
- • The legislation currently has one cosponsor and is positioned to ease bankruptcy rules for medical debtors while potentially pressuring healthcare creditors and lenders and reducing bad debt burdens in the healthcare sector.
Summary
Representative Steve Cohen (D-TN-9) introduced H.R. 9670, the Medical Bankruptcy Fairness Act of 2026, on July 14, 2026, targeting reform of federal bankruptcy protections for individuals whose debt burdens are heavily influenced by medical expenses or medical-related loss of income. The bill creates a statutory classification called a "medically distressed debtor" and amends title 11 of the United States Code to provide tailored bankruptcy protections for this population.
To qualify as a medically distressed debtor, an individual must satisfy one of three conditions within the three-year period preceding bankruptcy filing. First, they must have incurred or paid uncovered medical debt for themselves or certain close family members that exceeds the lesser of 10% of adjusted gross income or $10,000. Second, they may have at least $10,000 in domestic support obligations negatively affected by a medical issue that would meet the bill's medical-debt threshold. Third, the debtor must have experienced job or income loss attributable to personal illness or injury, caregiving for an ill or injured family member, or a declared national, public health, or similar emergency. Spouses of individuals meeting these criteria also qualify for protections.
The bill materially relaxes several existing bankruptcy procedural requirements for medically distressed debtors. Under Chapter 7 liquidation bankruptcy, it waives one of the existing dismissal rules that can block cases for individuals with certain income levels. For Chapter 13 repayment plans, the legislation creates an additional exception allowing medically distressed debtors to qualify under more flexible terms. Notably, the bill exempts these debtors from standard credit counseling requirements that normally apply before bankruptcy filing. In certain circumstances, medically distressed debtors could protect up to $250,000 in property value during bankruptcy proceedings, significantly above typical exemption thresholds.
The bill currently carries one cosponsor and has been viewed by legislative analysts as likely to ease bankruptcy rules for medical debtors while simultaneously pressuring healthcare creditors and lenders and potentially reducing bad debt burdens across the healthcare credit ecosystem. The legislation reflects ongoing Congressional efforts to address the intersection of medical debt and personal insolvency in the United States bankruptcy system.
To qualify as a medically distressed debtor, an individual must satisfy one of three conditions within the three-year period preceding bankruptcy filing. First, they must have incurred or paid uncovered medical debt for themselves or certain close family members that exceeds the lesser of 10% of adjusted gross income or $10,000. Second, they may have at least $10,000 in domestic support obligations negatively affected by a medical issue that would meet the bill's medical-debt threshold. Third, the debtor must have experienced job or income loss attributable to personal illness or injury, caregiving for an ill or injured family member, or a declared national, public health, or similar emergency. Spouses of individuals meeting these criteria also qualify for protections.
The bill materially relaxes several existing bankruptcy procedural requirements for medically distressed debtors. Under Chapter 7 liquidation bankruptcy, it waives one of the existing dismissal rules that can block cases for individuals with certain income levels. For Chapter 13 repayment plans, the legislation creates an additional exception allowing medically distressed debtors to qualify under more flexible terms. Notably, the bill exempts these debtors from standard credit counseling requirements that normally apply before bankruptcy filing. In certain circumstances, medically distressed debtors could protect up to $250,000 in property value during bankruptcy proceedings, significantly above typical exemption thresholds.
The bill currently carries one cosponsor and has been viewed by legislative analysts as likely to ease bankruptcy rules for medical debtors while simultaneously pressuring healthcare creditors and lenders and potentially reducing bad debt burdens across the healthcare credit ecosystem. The legislation reflects ongoing Congressional efforts to address the intersection of medical debt and personal insolvency in the United States bankruptcy system.
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