This holiday will be a very happy one for 44 people in upstate New York who were struggling under medical debt. The debt activism group Strike Debt has been raising funds under the name of Rolling Jubilee with the purpose of buying distressed medical debt on the secondary market, then wiping it out. Their initial goal was to raise $50,000. But that was before they went viral, with write-ups from the New York Times, Boing Boing, Fortune Magazine, and here at Addicting Info. So far, Rolling Jubilee has raised almost half a million dollars.
Most of that money is set to buy distressed medical debt next month. As a “beta version” of the plan, Strike Debt has already spent $5,000 to buy up $100,000 of such debt for those 44 people. On Sunday, the group gathered to send out notifications to those lucky people. They decided to send them in small boxes wrapped in holiday paper since many debtors receive so many unfamiliar envelopes and they don’t want these bits of good news to end up in the trash, unopened. The letter begins, “Seasons Greetings!”
We write with good news: the above referenced account has been purchased by the Rolling Jubilee Fund, a 501(c)(4) non-profit organization. The Rolling Jubilee Fund is a project of Strike Debt. The mission of this project is to buy and abolish personal debt. We believe that no one should have to go into debt for the basic things in our lives, like healthcare, housing, and education.
You no longer owe the balance of this debt. It is gone, a gift with no strings attached. You are no longer any obligation to settle this account with the original creditor, the bill collector, or anyone else.
But, as usual, there is a grinch in the mix. Yves Smith of the blog Naked Capitalism calls it “a gimmick” and insists that it hides a possible tax risk for recipients. According to Smith, forgiving the debt could count as a windfall for the debtors, possibly worsening their situation. She argues that
… by buying the debt in the first place, Strike Debt is engaging in commercial activity, and that the recipients are likely to be middle class, and therefore ineligible for tax exemption as a ‘charitable class.’ Sophisticated taxpayers get tax opinions from law firms with recognized expertise in tax matters, or ask for rulings from IRS (a non-starter here), or document their positions with heavily researched memos. Rolling Jubilee should get one of its sympathetic celebrities to write a check to a serious tax lawyer to take a proper look.
Rolling Jubilee has done exactly that. The tax lawyer advising the group found herself mystified by the critiques. She dismisses those concerns:
It doesn’t make a great deal of sense to me. When Habitat for Humanity is helping people build houses, someone still has to buy the lumber. It doesn’t change their tax status. The critical thing is that this is a not-for-profit organization, and it’s not engaged in trying to make money. This is focused on medical debt and people with health problems can be categorized as distressed. You don’t need to show that they’re impoverished.
Of course, the goal of buying up $10 million in distressed medical debt is a huge goal but only the tip of the iceberg in our system. But Strike Debt, which grew out of the Occupy movement, has started the ball rolling: chapters have sprung up in several cities and organizers are planning next steps to occur in conjunction with Martin Luther King’s Birthday. If you’d like to be involved, contact Rolling Jubilee.