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Massachusetts Bankruptcy Case Highlights Medical Lien Law

By Harry S. Margolis

A recent Massachusetts bankruptcy case, In re: Yarmyn Feliberty (US Bankruptcy Ct., Mass. No. 12-31819, Jan. 13, 2014), sheds light on the laws around medical liens on personal injury recoveries. In this case, Yarmyn Feliberty recovered a $20,000 personal injury settlement. Before filing a bankruptcy petition, her attorney distributed $3,500 of the the proceeds to Ms. Feliberty.

After the bankruptcy petition was filed, the bankruptcy trustee took possession of the remaining settlement funds after payments of attorney’s fees and costs and then sought to hold the attorney liable for the $3,500 he had distributed to his client. His argument was that as bankruptcy trustee, he had in effect inherited the claims of the medical lienholders, Baystate Medical Center and Boston Medical Center Health Plan.

The bankruptcy court does not disagree with the trustee about his standing, but rules that no liens existed because neither Baystate nor Boston Medical Centers took the necessary steps pursuant to Mass. Gen. Laws Ch. 111, sec. 70A, to create their liens. “[T]he act required by the statute to effectively create (and perfect) a statutory Medical Lien is the sending of a written notice that complies with” the statute.

Under the medical lien law, health care providers have the right to recover their costs from personal injury settlements. But unlike Medicare and MassHealth liens, which are automatic, these liens must be created and perfected under the specific terms of the statute. Otherwise, while their claim for reimbursement may exist, they have no lien against the lawsuit proceeds. This can be very important to personal injury attorneys, who can be personally liable if they disburse funds subject to a lien.

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