- March 7 - As the United States Senate takes up consideration once
again of unfair, unbalanced, and unjust Bankruptcy ‘Reform’ legislation (S. 420)
that is the top priority of credit card issuers and big banks, U.S. Senator Paul
Wellstone today pressed colleagues to support his amendment establishing a
safe-haven for families who go bankrupt paying huge medical bills. The
Wellstone Medical Bills Amendment provides that no provision of the Bankruptcy
‘Reform’ bill now being debated will apply to a debtor who files for bankruptcy
if a court determines that the debtor filed as a result of overwhelming medical
bills, unless the debtor elects to have a particular provision apply.
“My amendment to this so-called reform bill would go along way toward balancing
this legislation. It really goes to the heart of what the fundamental problem
is with this bill: that it purports to go after abuse in th bankruptcy system
but casts a wide net that captures all debtors who file for bankruptcy
regardless of their circumstances. We know that in the vast majority of cases
bankruptcy is a drastic step taken by families in desperate financial
circumstances and overburdened by debt. Specifically we know that nearly half
of all debtors report that high medical costs forced them into bankruptcy – this
is an especially serious problem for the elderly,” Wellstone said.
The bankruptcy bill purports to target abuses of the bankruptcy code by wealthy
scoff laws and deadbeats (who make up about 3% of all filers according to an
independent study). Yet hundreds of thousands of Americans file for bankruptcy
every year – not to game the system – but because they are overwhelmed by
medical bills. Unfortunately, there are at least 15 provisions in S. 420 that
make it harder to get a fresh start regardless of whether the debtor is a
scofflaw and or a person who must file because they are made insolvent by their
medical debt. These include, but are in addition to, the means test.
As an analysis in the Wall Street Journal last week put it:
“The bill is full of hassle-creating provisions, some reasonable, some prone to
abuse by aggressive creditors trying to get paid at the expense of others. In a
thicket of compromises, Congress risks losing sight of the goal: making sure
that most debtors pay their bills while offering a fresh start to those who
The Wellstone amendment will preserve the fresh start for those debtors who
‘honestly can’t’ because they are drowning in medical debt.
Is the Wellstone amendment made redundant by the means test in the bill?
Absolutely not. Neither the means test nor the safe harbor in the bill apply to
the vast majority of the new burdens placed on debtors. Under S. 420, debtors
will face these hurdles to filing regardless of their circumstances. Examples
of these provisions include:
The pre-bankruptcy credit counseling requirements – at the debtor’s expense – as
if medical debts can be counseled away.
New limits on repeat filings – again, regardless of personal circumstances.
Changes to existing cramdown provisions in Chapter 13 – making it more difficult
for debtors to keep their car.
New notice, tax return filing obligations, and new administrative burdens that
are expected to raise the cost of filing even a simple case by hundreds of
Does the Wellstone amendment carve out a serious loop hole in the means test?
No, the debtor can only get an exemption from this bill if the court finds that
the debtor was forced to file because of medical debt. A debtor who carried
some medical debt, but filed because he ran up a bunch of credit card bills
would not meet this standard and would not be affected by the Wellstone
Does the Wellstone amendment leave hospitals or medical centers at a
No, the amendment does not make medical debt a lower priority than other debt.
In fact, it does not affect the dischargeability or non-dischargeability of
medical debt at all. The protections under current law for medical creditors
remain under this amendment.
“Now the proponents of the bill have said that all of these provisions are
necessary to curb abuse. If that’s true, colleagues, then I assume that the
proponents of this bill will support this amendment. If the sponsors are
serious about just taking on deadbeats -- but not ordinary working Americans who
file for bankruptcy because they simply have no other choice to rebuild their
lives -- then they should rush to the floor to co-sponsor this amendment.
Because surely no one will argue that families who are drowning in debt as a
result of medical bills are gaming the system. These are the people who most
need this safety net. These are the people who most need a fresh start,” added