Doctor bankruptcy filers face more complex proceedings

Personal Finance. By Katherine Vogt, AMNews staff. April 11, 2005.

New federal bankruptcy legislation could spell bad news for physicians who are forced to turn to the courts to dig out of debt, experts warn.

The days of a relatively quick trip through bankruptcy proceedings likely will be gone for most physicians, they say. Instead, filing for personal bankruptcy will be a more complex, time-consuming and costly process.

Some assets, such as homes, that previously were untouchable in some states during bankruptcy proceedings might be at risk under the legislation. But the bill would leave some other safety nets intact, and protections could be strengthened for other assets, such as IRAs.

The changes are spelled out in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The bill, designed to cut down on abuse of the nation's bankruptcy system and supported by the credit card industry, was approved by the Senate in mid-March. It is expected to be passed by the House and signed into law by President Bush some time in April.

The measure could be especially significant to physicians, who sometimes rely on bankruptcy courts as their last protection when faced with excessive judgments in malpractice cases, said Marc Singer, senior partner with the Coral Gables, Fla.-based financial services firm Singer Xenos Wealth Management, whose clients are predominantly physicians.

"Bankruptcy is not a dirty word for physicians. It actually can be a very useful tool," he said. "[But] the bankruptcy bill being proposed will directly impact the protection physicians can get through bankruptcy courts."