Excerpted From: Jakayla J. Dabera, Too Poor for Care and Too Black for Bankruptcy: Making the Case for Fairly Discharging Medical Debt While Controlling for Racial Inequality, 15 Southern Journal of Policy and Justice 99 (Summer, 2022) (316 Footnotes) (Full Document Requested)


JaKaylaDaBeraThe 2020 election cycle brought attention to nuanced areas of law such as the Bankruptcy Code. One presidential hopeful in particular, Senator Elizabeth Warren, proposed revisions that would overhaul the Federal Bankruptcy System by focusing on issues that drive working families to bankruptcy. Part of her efforts would overhaul some of the changes implemented by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act so that these families can regain their financial footing. Senator Warren's campaign identified three issues that send families tumbling into bankruptcy: job loss, medical problems, or a family breakup. problems often correspond with job loss, creating a larger problem that will be further explored.

When facing an onslaught of medical debt, Americans have various reactions. Some choose to sacrifice, changing their financial plans by cutting back on other necessary expenses. In an article published by the New York Times, commenter J D Chastain II wrote:

My children haven't had Christmas in two years, and some weeks we barely eat. There are holes in my roof and an entire bathroom that is unusable because I cannot afford the repairs. Haven't even been able to buy underwear or socks in over a year and a half. In addition, prescription “coverage” is a joke--a single pharmacy that rarely fills prescriptions and my out-of-pocket costs are now equal to an eighth of my monthly paycheck. I am drowning.

Some take on the responsibility of a second job to pay for their medical expenses or for the medical expenses of those for whom they provide care. For example, Joan Engle described having to maintain two jobs to pay for her children's medical expenses. Although Joan was able to get another job, she had less time to monitor her 13-year-old son's Type 1 diabetes. Others are often discouraged to seek needed medical care after they experience the difficulty of paying off medical bills. debt is even associated with individuals choosing to ration their current medical supplies or forgo needed medical care. Victoria Moore, in her account, wrote about her fear of going to the doctor and receiving more medical bills. This fear caused her to stop participating in activities that she once enjoyed like mountain biking. She also uses WebMD to diagnose her symptoms and treat them with over the counter products. Doing this has allowed her to maintain insurance coverage while avoiding doctor visits for years.

But what happens when an individual, who is faced with financial catastrophe directly caused by medical debt and illness, chooses not to sacrifice or has to continue treatment? In this instance, many choose to avail themselves of the bankruptcy system. R. James described his experience:

I'm an educator with horrible insurance. I've always lived paycheck to paycheck. I'm 49, and two years ago had a massive heart attack that killed one third of my heart muscle. I'm now on 13 medications daily and must go to a heart transplant specialist at $1,200 per visit. I have maxed out my credit cards and will soon be filing for bankruptcy. This week, I'm hiding my car because it's about to be repossessed. My medical bills have destroyed my life, but if I stop my prescriptions or doctor visits I'll die.

Medical debt is often categorized as the accumulation of healthcare costs and related expenses. The inability to repay medical debt has led families to consider bankruptcy as a form of relief. But the true character or existence of medically induced bankruptcies are constantly called into question.

This Comment will argue that medically induced bankruptcy, or medical bankruptcy, is a crippling phenomenon every working-class American can face. The true nature of medical debt differentiates itself from other forms of debt in that it can be unavoidable, necessary, and is generally long term in form. Not only that but, AfricanAmericans disproportionately experience the adverse effects of rapidly accumulating medical debt and they do not fare equitably in the bankruptcy system. Therefore, the consequences of two systems, both the health care system and bankruptcy system, that are biased against AfricanAmericans makes it harder for them to receive care and avail themselves of the benefits of bankruptcy.

To remedy this, new provisions should be added to the Bankruptcy Code that control for racialinequality while providing more relief for medical debtors. Namely, most of the provisions proposed in the 2009 and 2016 versions of the Medical Bankruptcy Fairness Act should be revised and enacted. Some of these provisions include modifying existing definitions, creating new definitions, and modifying allowed exemptions. If large scale modifications are not possible, current provisions should be improved, at the very least, so that the same goal can be met. These include defining dependents, exempting some of the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) provisions with respect to credit counseling and means testing, as well as expanding exemption allowances.

Defining Medical Debt and Medical Bankruptcy

For this Comment, medical debt will mean the costs associated with medical care that are not covered by one's insurance. This includes out-of-pocket costs such as copays, premiums, prescription medication, physical therapy, doctor visits, specialist consultations, hospitalizations, and ambulance rides. Furthermore, medical debt is often the result of treating chronic illnesses. Such treatment requires the incursion of post-petition debt. By its very design, bankruptcy is meant to satisfy pre-petition debts, not post-petition debt. The argument that accurately providing medical debtors with relief requires the accounting of post-petition debt will be examined later in this Comment.

It is important to note that the working definition of medical debt employed by this Comment excludes the costs experienced by those who choose not to seek treatment because they cannot afford to do so. Moreover, it is important to recognize that individuals who can afford to pay for medical expenses, may choose to forego doing so. Although it is difficult to determine who can and cannott afford to pay for medical care, the medical debt discussed in this Comment is reflective of those who cannot afford to pay as evidenced by their decision to file for bankruptcy.

Medical bankruptcy occurs when an individual cites or experiences certain factors, related to their medical condition or to their position as a caregiver, that drives them to file for bankruptcy. These factors include out-of-pocket medical expenses; borrowing to repay medical expenses; and the loss of a job or income because of one's illness or position as a caregiver. A caregiver typically becomes bankrupt because they have incurred the medical expenses of the person under their charge, such as a spouse, a child, or a parent.

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The reality is that medical debt can easily and swiftly accumulate. Unforeseen illness or treatment for chronic conditions can have catastrophic effects on a family's financial situation. Furthermore, increased medical debt is experienced by both the insured and the uninsured. This experience does not speak to whether an individual is financially capable of paying for her medical debt through the use of insurance or her own, personal funds. In fact, determining who can and cannot afford to pay for their medical debt is unimportant to the goal of this comment. Moreover, the argument that insurance can lessen the blow of health care costs does not hold muster-- especially when many of America's most vulnerable populations do not have access to adequate health insurance or health care.

African Americans are quintessential to discussions of America's most vulnerable populations. Studies show existing disparities between whites and AfricanAmericans. These disparities range from educational achievement to homeownership and even to income. Moreover, Black Americans are not immune to being disadvantaged in both the bankruptcy and the health care system. The disparate treatment in these two contexts compound as BlackAmericans are more likely to incur medical debt than their white counterparts. When they are unable to pay, their next resort is often to enter the bankruptcy system, where they often don't receive the relief that they need.

Admittedly, the bankruptcy system is not the most ideal sphere to address medical debt. However, medical debtors often find themselves seeking relief from the bankruptcy system. Because of this, both the bankruptcy system and the health care system need to be rethought to create a synergy so as to better provide relief to medical debtors. Congress passing a new bill that embodies the best of the provisions advanced by both the Medical Bankruptcy Fairness Act of 2009 and 2016 would serve to protect medical debtors while controlling for racialinequality. In so doing, it would be the first step in creating this crucial synergy.

The provisions proposed in this comment would first expressly define dependents in the definition section of the Bankruptcy Code, accounting for those that rely on the debtor who may not be traditionally recognized as a dependent. The provisions also provide a working definition for medical debtors that encompasses both those that are medically distressed and those that are economically distressed. These provisions will also provide a mechanism to keep medically distressed debtors in Chapter 7 as opposed to having their cases dismissed or converted to a Chapter 13 case, against their own choice. Furthermore, the amendments proposed by this comment raises the issue of potentially discharging medical expenses incurred post-petition.

JaKayla DaBera graduated from Emory University School of Law in 2021. This article was completed in the spring of 2020 and subsequently published in the summer of 2022.