The medical debt crisis is a rare unifying issue for voters. States have a critical opportunity to mitigate the harms of medical debt while laying the groundwork for systemic, long-term change that reorients our healthcare financing system towards affordable, comprehensive, and accessible care—rather than a system that punishes people for getting sick. Voters across the political spectrum want action, and state lawmakers have a clear opening to respond with policies that have overwhelming public support. This brief is the second in a series taking a deeper dive into some of those policies—just how much support do they have, and where have they been put into practice?
Policy Focus: Protect Personal Property from Being Taken Due to Medical Debt
The problem.
Medical debt is unique among other debt types, as it is rarely planned or voluntary. We know more than 100 million people contend with debt from medical or dental bills, often making tremendous trade-offs just to make ends meet. Like charging interest on an already unaffordable bill, taking someone’s personal property- like their house or car- to satisfy a medical debt undermines their economic stability. Seizing the very things that keep people in the workforce makes it extremely difficult (if not impossible) for them to ever fully crawl out from underneath their debt. Many people in the United States live in areas without effective public transportation, while for others (gig workers for Uber or DoorDash, self-employed truckers) their vehicle is literally their job—meaning if you take my car it is very unlikely I will be able to find a consistent way to work and may lose my job. If I lose my job, I am likely to struggle to make my mortgage payments—and am even less likely if a lien is placed on my home. Additionally, while liens no longer appear on credit reports they can still hurt credit scores and remain public record. All told, taking personal property to satisfy a medical debt does nearly nothing to make a person more likely to pay their debt and only risks trapping them in the cycle of poverty.
Federal law does not protect people from having their homes or vehicles taken to satisfy a medical debt—the Fair Debt Collection Practices Act (FDCPA) only regulates how debt collectors act, not what they can seize. As noted by Commonwealth Fund, most states do not limit creditors from foreclosing on someone’s home for a medical debt but do provide for some sort of homestead exemption. This amount, however, is highly variable—states like New York and Texas have unlimited exemptions (meaning your home is protected during bankruptcy), whereas Arkansas only provides for an exemption of “up to” $2500. Laws protecting other personal property (such as vehicles) are even more difficult to parse. Finally, as highlighted by the National Consumer Law Center (NCLC), state-level exemption laws are only going to become more important as people are forced to contend with increasing costs and a marked surge in debt collection lawsuits.
State approaches.
Many state laws focus protecting personal property broadly, rather than specifying a particular debt type; the rationale for protecting personal property of these kinds is the same—shelter and transportation represent basic human needs and they must be protected. Indeed, we know seizing people’s property is not an effective means to help people repay medical debts—a fact also recognized by voters across the political spectrum, with 90% supporting policies that limit collection agencies’ ability to take a person’s house, belongings, or car(s) due to medical debt. Again, people generally want to pay back their medical bills and they expect policymakers to help create a space where they can do this without fear of losing their homes.
Strong, bipartisan support for limiting collection agencies’ ability to take a person’s house, belongings or car(s) due to medical debt.
Legislative efforts on personal property protections at the state level can be challenging to track; often, existing consumer protections apply to all consumer debt, not just medical debt. State legislatures recognize these needs are so basic there is a compelling public interest to have them protected, even when a person defaults. NCLC has an excellent guide to state exemption laws, including A-F grade report cards for all U.S. states and territories. They’ve established five basic standards, but for our purposes we will focus on three:
- Allowing the person to keep a used car of at least close to average value;
- Preventing the seizure and sale of the person’s necessary household goods; and
- Preserving the family’s primary home.
No state received an ‘A’ grade, but Arizona, California, Massachusetts, New Mexico, Puerto Rico, and Texas all received a ‘B’—and it is worth noting these places cover nearly the entire extent of the political spectrum, showing how support for these protections transcends party affiliation. We provide brief examples of state approaches for each protection below, with the caveat that these types of protections should all be self-enforcing to the greatest extent possible; forcing people to file complicated legal paperwork or engage in other legal proceedings on top of contending with medical debts (and health care concerns) means they are far less likely to avail themselves of existing protections than if they were to kick in automatically.
Protecting people’s vehicles.
Making sure someone is able to retain at least an average value used car is an important protection; NCLC’s Model Family Protection Act recommends an exemption of at least $15,000 (or $25,000 if the car is adapted for disability), with the caveat this amount is still well below the average price of a used car. Only 12 states and territories provide such an exemption, with Puerto Rico leading the way by allowing an unlimited exemption on the value of the car if it is “considered the working tool of its owner.” By contrast, Pennsylvania only provides for a $300 exemption on the value of the vehicle.
Preventing the seizure and sale of necessary household goods.
While less discussed than others, preventing household goods from being taken is still important, particularly to those who find their belongings being seized. Household goods can include things like clothing, furniture, and appliances—all objects typically with little resale value but immense personal value. Indeed, the time and money necessary to seize these objects often outweighs how much they would gather at auction. Best practice is to exempt all household goodsand require a court order to seize anything worth more than $3000; California exempts all necessary household goods, while Oklahoma exempts all household goods and kitchen furniture.
Preserving the family’s primary home.
The threat of losing housing hangs heavy over people with medical debt; as mentioned above, most states do not prevent creditors from foreclosing on someone’s home for a medical debt but do provide for some sort of homestead exemption. Existing laws can be arcane, confusing, and highly variable across states—e.g., while Texas provides for an unlimited homestead exemption, neighboring Arkansas only provides for an exemption “up to” $2500 while also including minimum acreage requirements.