Treatment of Health Care Expenses under the Bankruptcy Abuse Prevention and Consumer Protection Act

Publication Date: March 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

Type:

Abstract:

If enacted, the Bankruptcy Abuse Prevention and Consumer Protection Act would subject prospective debtors under the U.S. Bankruptcy Code to a means test to determine whether they could liquidate under chapter 7 or reorganize under chapter 13. Large outstanding medical expenses alone will not determine eligibility to liquidate or reorganize. They will, however, affect the means test in one of two ways. Prebankruptcy health care expenses are likely to raise the amount of a debtor's unsecured debt. Health insurance premiums and ongoing costs for care of the debtor's dependents may be deducted from the debtor's monthly income to determine the level of disposable income.