By Julian Pecquet - 07/15/10 03:54 PM EDT
Experts testifying Thursday on a medical bankruptcy bill disagreed on how widespread the issue really is.
U.S. Bankruptcy Judge Cecelia Morris and clinical law professor Peter Wright of New Hampshire’s Franklin Pierce Law Center offered their personal experience working with people whose illnesses have led to job loss or a reduction in working hours.
“Because so many families are living paycheck to paycheck,” Wright said in prepared testimony, “any significant interruption in income pushes them over the edge.”
Morris said people with serious conditions get into credit card debt to pay for the medical bills for themselves and their families, and that “their need for care outstrips any financial caution.”
Aparna Mathur, a resident scholar with the conservative American Enterprise Institute, questioned research that suggests a rising number of medical bankruptcies. Mathur said his analysis of the 2007 Survey of Consumer Finances, which clearly separated medical debt and credit card debt, showed only 2.4 percent of families reported any medical debt.
The hearing, by the House Judiciary Committee’s Commercial and Administrative Law subpanel, focused on the Medical Bankruptcy Fairness Act introduced by Rep. Carol Shea-Porter (D-N.H.) last February. Sen. Sheldon Whitehouse (D-R.I.) introduced a sister bill in the Senate last August.
The bill would amend federal bankruptcy law to allow people with medical debt to exempt as much as $250,000 of their home or burial plot’s value from the estate in bankruptcy.
The House bill has five co-sponsors, while the Senate version has six.
Morris in her prepared testimony said the bill does too little for people with medical debt because they’ve often exhausted the equity in their residence before filing for bankruptcy.
Mathur, on the other hand, stressed the bill’s possible unintended consequences.
“By allowing debtors to file as medical debtors irrespective of whether medical debts are actually driving the household to bankruptcy,” he wrote in prepared testimony, “the Medical Bankruptcy Fairness Act would essentially be providing relief from credit card debt rather than medical debts.”