The Medical Bankruptcy Fairness Act of 2026 creates special bankruptcy protections for people whose debts are primarily driven by medical expenses. The bill defines a "medically distressed debtor" as someone who has incurred significant medical debt in the past three years—either more than 10 percent of their adjusted gross income or at least $10,000—or who lost income due to a medical condition or caring for a sick family member. These debtors would receive several key benefits: they can exempt up to $250,000 in home equity or burial plot value from bankruptcy proceedings, they are waived from certain income-based bankruptcy requirements that normally prevent them from filing, they can be excused from mandatory credit counseling, and they may be able to discharge student loans based on undue hardship more easily. Additionally, bankruptcies filed by medically distressed debtors would not appear on credit reports, protecting their financial reputation. The changes take effect immediately upon enactment and apply only to bankruptcy cases filed after the bill becomes law.
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