Bankruptcy Laws to be Overhauled (No more Chapter 7)

[Larry]

Originally posted by skin-n-vegas

I really want to understand you here,

What exacly are the special interest exemptions that exisit with this particular bill that were not already in place prior to this bill?

I can see you point if you would like to see more reofrm in the other Chapters available for filing, but in regards to this particular bill, I am missing what you are inferring.

Again, doesnt the means test add more scrutiny to those that have higher incomes? Doesnt it actually minimize the abuse from the wealtiest?

Maybe I'm totally missing it, but I read the entire bill and do not see special interest exemptions what-so-ever.

The reason you don't see any mention of millionaire deadbeats in this bill, is because the GOP, voting in the greatest display of party lockstep ever seen, successfully prevented attempts to stop bankrupcy abuse by the rich.

Under the brave, new, rules, the couple earning minimum wage who owe $100K are classified as bankrupcy abusers.

But the CEO who opens a bank account where the stated purpose of the account is to make the money in the account immune to bankrupcy, well, nothing broke, here. Move along. He can hide an unlimited amount of wealth, go "I'm broke", walk away from his debts, and still be a millionaire.

Enron executives can build million-dollar Florida mansions, even after they've been sued by the folks they stole from, then use the bankrupcy laws to shield themselves from punishment for their actions, and come out rich, while claiming to be broke.

In fact, the GOP prevented the new law from applying to millionaires because if it had applied to millionaires, then many GOPers would've voted against it, and then it wouldn't have passed.

In short, this law is designed to punish deadbeats who didn't plan on it.

[chomerics]

Originally posted by Larry

Chro,

Thanks for posting the details of the means test. Somehow I'd expected it would be that way, nut I hadn't seen it mentioned, and therefore I'd assumes I was simply imagining it.

So, s-n-v,

This fits you definition of not soaking the poor? A couple earning minimum wage isn't bankrupt unless they're in debt more than $150K?

And no, your means test doesn't mean "those rich folks that you gripe about constantly" will be affected. The GOP successfully prevented any attempt to prevent pre-planned exemption of unlimited wealth, if the deadbeat simply had the foresight to hide his wealth in "how to go bankrupt and still be a millionaire" shelters.

Larry, the more I look into this bill, the more I completely hate. This bill will cripple any American who needs debt relief. It gives the creditors the power of the IRS in terms of debt collection and it also keeps the millionaires loopholes into the law. I just cant see how any democrat would have voted for this bill, Biden included. My opinion of him has gone WAY down because of this.

[Larry]

And BTW,

(1) reasonably necessary expenses incurred to maintain the safety of the debtor and the debtor's family from family violence as identified under the Family Violence Prevention and Services Act;

If I were the kind of person who constantly suspects the government of intentionally hiding special-interest loopholes under innocuous-sounding language, (and I am), that language would make me suspicious.

Don't know why, but somehow I suspect that what that clause means is that rent isn't considered an additional expense, but, say, condo fees for a gated community are.

Although there are other possible reasons for that language, too. Maybe it means that, if there's Government Housing in your community that meets the minimum standard of "you probably won't get killed, here", then you're not allowed to count rent as a living expense.

Although there are lots of other possible explanations, too. It's even possible it's legitimate.

[chomerics]

Originally posted by Larry

And BTW,

If I were the kind of person who constantly suspects the government of intentionally hiding special-interest loopholes under innocuous-sounding language, (and I am), that language would make me suspicious.

Don't know why, but somehow I suspect that what that clause means is that rent isn't considered an additional expense, but, say, condo fees for a gated community are.

Although there are other possible reasons for that language, too. Maybe it means that, if there's Government Housing in your community that meets the minimum standard of "you probably won't get killed, here", then you're not allowed to count rent as a living expense.

Although there are lots of other possible explanations, too. It's even possible it's legitimate.

Actually Larry, I think it refers to the disposable income formula determined by the IRS for levying back taxes, but I'm not sure.

[SnyderShrugged]

sigh.

I give up fellas.

You have your opinions and I have mine too.

I can't believe that you read into the above mentioned secion as something negative.

Oh well, it's been fun, but you are a lost cause.

[chomerics]

Originally posted by skin-n-vegas

sigh.

I give up fellas.

You have your opinions and I have mine too.

No, sorry but this won't cut it. A simple, "I have my opinion and you have your opinion" is not the correct answer.

Now, knowing what this bill entails, are you still for this bill??? Is this bill a "good" idea to you??? Do you or do you NOT agree that this bill does nothing but screw over the working class???

I can't believe that you read into the above mentioned secion as something negative.

Oh well, it's been fun, but you are a lost cause.

Did you even read my post? Did you even read what the bill says? HOW can you justify your comment? Do you want the credit card companies to take ALL of their money? Please, explain yourself, because I have a hard time understanding what you are talking about in your constant defense of this bill.

You were incorrect about the medical bills, you were incorrect about the means test, you were incorrect about protecting the millionaires, yet you still think this is the way to go??? It isn't hard to admit you made a mistake is it? It isn't that impossible to admit that the democrats were right is it? I mean come on now, you are a "libertarian", not a republican, so is this a time you agree with the democrats and not the republicans?

Skin, this isn't about "opinion", this is about the facts of the bill! Facts, which you have not accounted for, facts which you falsely proclaimed "made it fair". So now, tell me your opinion of this bill. I listed the four things which it does, are you still in favor of this bill? Do you still think it is a good idea to make poor people pay THEIR debt, but let millionaires escape without paying theirs?

Do you think this is good for America? Is this what you think, please let me into your so-called enlightened world, because this is completely bogus. You can still change your mind about your party, you know it is not to late. You can still put an end to this nonsense, and say what you truly think about this bill, this administration and your claims, because you've ended up on the wrong side of every argument we've had. At some point, this has to sink in.

[iheartskins]

Irrespective of where you stand, it should bear notice who is finacing this enormous debt: Asia. We are increasingly (and frighteningly) dependent on them to keep our economy afloat. See the article that I posted here for more information.

[SnyderShrugged]

Originally posted by chomerics

No, sorry but this won't cut it. A simple, "I have my opinion and you have your opinion" is not the correct answer.

Now, knowing what this bill entails, are you still for this bill??? Is this bill a "good" idea to you??? Do you or do you NOT agree that this bill does nothing but screw over the working class???

Did you even read my post? Did you even read what the bill says? HOW can you justify your comment? Do you want the credit card companies to take ALL of their money? Please, explain yourself, because I have a hard time understanding what you are talking about in your constant defense of this bill.

You were incorrect about the medical bills, you were incorrect about the means test, you were incorrect about protecting the millionaires, yet you still think this is the way to go??? It isn't hard to admit you made a mistake is it? It isn't that impossible to admit that the democrats were right is it? I mean come on now, you are a "libertarian", not a republican, so is this a time you agree with the democrats and not the republicans?

Skin, this isn't about "opinion", this is about the facts of the bill! Facts, which you have not accounted for, facts which you falsely proclaimed "made it fair". So now, tell me your opinion of this bill. I listed the four things which it does, are you still in favor of this bill? Do you still think it is a good idea to make poor people pay THEIR debt, but let millionaires escape without paying theirs?

Do you think this is good for America? Is this what you think, please let me into your so-called enlightened world, because this is completely bogus. You can still change your mind about your party, you know it is not to late. You can still put an end to this nonsense, and say what you truly think about this bill, this administration and your claims, because you've ended up on the wrong side of every argument we've had. At some point, this has to sink in.

Yes, this bill is good for ALL americans who are legitimate debtors and creditors alike.

How was I incorrect. Here are direct quotes from the Bill as I have posted before.

You said I was incorrect in stating that the Bill has protections for those with Medical expenses and low income earners and in the means test definition:

Bill specifics:

A means test

A bankruptcy court would then apply a means test — taking into account MEDICAL EXPENSES, elderly parent support or care of grandparents and disabled children — to determine whether the debtor has enough money to repay.

Sec 102 of the bill EXACT ;anguage:

Includes within the calculation of debtor's monthly expenses: (1) reasonably necessary expenses incurred to maintain the safety of the debtor and the debtor's family from family violence as identified under the Family Violence Prevention and Services Act; (2) continuation of actual expenses paid by the debtor for the care and support of an elderly, chronically ill, or disabled household or non-dependent immediate family member; and (3) an additional allowance for housing and utilities based upon documented home energy expenses.

So, you are wrong. Cut and dry. Medical expenses, low income folks, housing protection, elder care, etc are all considered within the means test.

Time to apologize for part 1. Unless you can show me from the bill specific language where this is not the case.

Then you said I was incoorect about protecting the millionaires:

The bill's utilization of the means test is adding more scrutiny to cases where the debtor has a wage higher thant the state average:

Section 104 of the bill states: Please notyice #2 in regard to additional CRIMINAL penalties for concealment of assets.

Sec. 104) Revises procedural guidelines to mandate a written notice to the individual consumer debtor before commencement of a case stating: (1) the types of services available from credit counseling agencies; (2) the criminal penalties for fraudulent concealment of assets; and (3) that all creditor-supplied information is subject to examination by the Attorney General.

Guess what? You are wrong again!

Lastly, How does this hurt any of the "little guys" what-so-ever?

They still get debt relief, but have to make affordable monthly payments over a long period of time.

Only the highest incomes have to pay anything back and those that really need it get full debt relief, just like they did in chapter 7.

Come on Cho, you lost this one if you look at the specific bill. You are dead wrong in every point you have made.

Prove it with direct quotes from the Bill if you can, but quotes from an opinion pice won't cut it at this point.

Here is the link to the Bill summary if you will on;y take the time to read it.

http://thomas.loc.gov/cgi-bin/bdquery/z?d109:SN00256:@@@D&summ2=m&

I won't hold my breath fopr your apology and don't even expect you to do you due dilligence yet again.

Please don't come off all rightous that you were right and I was wrong, because the actual bill will proive you incorrect all day long.

Lastly, I'd like to ask someone other than Cho or Larry to verify my conclusions by reading the link as well.

I will fully admit that I am incorrect if someone can show me facts and not opinion that substantiates their claims.

Thanks.

[portisizzle]

Somehow this debate has turned into a discussion of the details. Chrome, I want you to admit some basic points in order to further this discussion.

1) A person borrows money based on a contract they sign or agree to with another party who has money.

2) A party who lends money does so with the intention of gaining a suitable return. The interest rate and the term of repayment is part of the contract.

3) If the borrower does not pay according to the terms stipulated in the contract then the borrower is in default on the loan.

4) If the borrower does not correct the situation, then the borrower is right in being able to collect the money borrowed based upon the terms of the contract.

Forget bankruptcy for one minute. Are you OK with the basis of the typical loan obligation? If not, where do you disagree, at this point.

[Larry]

Originally posted by skin-n-vegas

Yes, this bill is good for ALL americans who are legitimate debtors and creditors alike.

How was I incorrect. Here are direct quotes from the Bill as I have posted before.

You said I was incorrect in stating that the Bill has protections for those with Medical expenses and low income earners and in the means test definition:

Bill specifics:

A means test

Yes, it does. A means test that's been deliberatly designed so that nobody can possibly meet it.

(Claiming that the means test cures all evil is great, as long as nobody finds out what the means test actually says. But that cover's been blown, now. Which explains why you refuse to discuss specifics.)

Q: Is a couple, both earning minimum wage, in debt for $150K, bankrupt?

Under this new law, they're not.

A bankruptcy court would then apply a means test — taking into account MEDICAL EXPENSES, elderly parent support or care of grandparents and disabled children — to determine whether the debtor has enough money to repay.

Sec 102 of the bill EXACT language:

Includes within the calculation of debtor's monthly expenses: (1) reasonably necessary expenses incurred to maintain the safety of the debtor and the debtor's family from family violence as identified under the Family Violence Prevention and Services Act; (2) continuation of actual expenses paid by the debtor for the care and support of an elderly, chronically ill, or disabled household or non-dependent immediate family member; and (3) an additional allowance for housing and utilities based upon documented home energy expenses.

So, you are wrong. Cut and dry. Medical expenses, low income folks, housing protection, elder care, etc are all considered within the means test.

No, your wrong. Cut and dry.

The language you've quoted allows deductions for future medical expenses.

That minimum-wage couple who owe $150K are still classified as bankrupcy abusers unless they have more medical bills, incomming.

(I'll also point out, section 3 says that the hypothetical Enron bankrupt millionaire is not only allowed to pretend his custom-built, ten-million-dollar, oceanfront house isn't an assett, but the cost of heating the pool is considered "living expenses"

Time to apologize for part 1. Unless you can show me from the bill specific language where this is not the case.

Then you said I was incoorect about protecting the millionaires:

The bill's utilization of the means test is adding more scrutiny to cases where the debtor has a wage higher thant the state average:

Yes it does.

And it also doesn't say a thing about existing "You can be a millionaire after bankrupcy" "loopholes" (I put loophole in quotes because these aren't features that the bill's designers accidentally missed. They successfully prevented repeated efforts to close them.

In short, yes, the Enron millionaire has to pass a means test.

And the means test isn't allowed to consider his $10M house, or his offshore bank accounts, or his "anti-bankrupcy trust fund'. All the means test is allowed to look at is the income from his job. (BTW, he doesn't have one.)

Section 104 of the bill states: Please notyice #2 in regard to additional CRIMINAL penalties for concealment of assets.

Sec. 104) Revises procedural guidelines to mandate a written notice to the individual consumer debtor before commencement of a case stating: (1) the types of services available from credit counseling agencies; (2) the criminal penalties for fraudulent concealment of assets; and (3) that all creditor-supplied information is subject to examination by the Attorney General.

Guess what? You are wrong again!

And Guess What? The Enron millionaire doesn't have to conceal them. He can list them, and existing law requires the court to act like they're not there.

Lastly, How does this hurt any of the "little guys" what-so-ever?

They still get debt relief, but have to make affordable monthly payments over a long period of time.

Only the highest incomes have to pay anything back and those that really need it get full debt relief, just like they did in chapter 7.

I'll bet that minimum-wage couple who're being ordered to send half of their income, for the next five years, merely to pay the interest on their $100K debt feel consoled, knowing that they're "only the highest incomes". (Whereas the guy with the trust fund and the $10M house is really broke.)

Come on Cho, you lost this one if you look at the specific bill. You are dead wrong in every point you have made.

Prove it with direct quotes from the Bill if you can, but quotes from an opinion pice won't cut it at this point.

He (and I) are simply reading the quotes you provided.

What we're not[/i] doing is following your assumptions that simply because the law contains the words "means test", that this means it doesn't apply to the poor.

Cho has shown you the formula used, and done the math A couple making minimum wage is considered inelegible for bankrupcy under the means test you're so proud of.

I will fully admit that I am incorrect if someone can show me facts and not opinion that substantiates their claims.

Thanks.

You've been given facts. You keep ignoring them.

Here's another fact: In Florida, Texas, and a few other states, a deadbeat is allowed to have unlimited assets in the form of his home, and those assets are exempt from any bankrupcy proceedings. That's why Ken Lay is currently spending every dime he's got building a custom house in Florida, before the people he ripped off can get him into court. He's following a current, legal strategy, so that when he gets convicted, and ordered to pay the money he stole back, he can claim he's broke, and the court isn't allowed to touch the money he sank into the house.

These loopholes exist in current law, and are used every day by people who are committing premeditated bankrupcy fraud (the legal definition of which was explained to me as "taking any action in anticipation of bankrupcy"). The practice is so common that, for example, in the case of Ken Lay, CNN was even able to explain in advance that this was the reason Lay was building his house in Florida.

And those loopholes aren't mentioned in the law you're so proud of, because the GOP voted unanimously to leave those kinds of bankrupcy untouched.

The "means test" that you keep pointing to, claiming that it's tough on millionaires, doesn't do a thing about the fact that current law forces courts to ignore assets of people who planned their bankrupcy in advance.

[SnyderShrugged]

Larry, I asked you not to respond!!!!

Where did this hypothetical couple thing come from? (J/K/)

Made it up, huh guys?

Please use only specific language of the bill to back up your claims, like I requested.

Can't a poor person also plan their bankruptcy in advance?

So at least you finally admit that your issues are not with this Bill, but with the fact that you feel some issues with the CURRENT laws havnt been addressed yet.

So it's safe to say this bill, without reference to any other current laws is in fact a good thing.

Thank you, try again.

[SnyderShrugged]

Also Larry, How do you know that Cho's example of the means test is correct? Prove it.

How do you know what the hypothetical couple's payment arrangements would be? You claim 5 years at half their income with zero basis in fact.

[chomerics]

Originally posted by skin-n-vegas

Yes, this bill is good for ALL americans who are legitimate debtors and creditors alike.

How was I incorrect. Here are direct quotes from the Bill as I have posted before.

You said I was incorrect in stating that the Bill has protections for those with Medical expenses and low income earners and in the means test definition:

Bill specifics:

A means test

A bankruptcy court would then apply a means test — taking into account MEDICAL EXPENSES, elderly parent support or care of grandparents and disabled children — to determine whether the debtor has enough money to repay.

Sec 102 of the bill EXACT ;anguage:

Includes within the calculation of debtor's monthly expenses: (1) reasonably necessary expenses incurred to maintain the safety of the debtor and the debtor's family from family violence as identified under the Family Violence Prevention and Services Act; (2) continuation of actual expenses paid by the debtor for the care and support of an elderly, chronically ill, or disabled household or non-dependent immediate family member; and (3) an additional allowance for housing and utilities based upon documented home energy expenses.

Again, you need to read it and comprehend what it is saying. You seem to be completely lacking in this area.

You of course are pointing to #2, so now tell me where it take into consideration your medical bills??? Is there some imaginary sentence which says "except for medical bills???" NO, it does not. Look at the language and comprehend it if you can. It is taking into consideration any FUTURE medical bills to pay for a sick family member. It makes ABSOLUTELY no mention of PAST bills which put you into debt in the first place!!! It says nothing about the bills you recieved when you were trying to help your dying spouse through cancer, absolutely NOTHING!!!

continuation of actual expenses paid by the debtor for the care and support of an elderly, chronically ill, or disabled household or non-dependent immediate family member

Paid for the debtor FOR the care of sick/elderly/chronically ill. Now, where does it mention anything about the medical bills OWED??? It makes ABSOLUTELY NO mention of them, it simply states that IF you have a sick child or a sick parent, then you can still go further into debt and not have this expense count against your income.

Now, Mr. Wizzard, what happens when this person dies??? I'll tell you what happens, the creditor comes after you with the same course of action the IRS does. You, in your blind partisain way, COMPLETELY ignore this fact. It does NOT come into effect when you are considering a MEANS test.

So tell me one more time the ABSOLUTE load of crap that you keep spewing that medical bills are covered, THEY ARE NOT!!! The only way they are partially covered is if you are in the PROCESS of caring for a sick person, once the said person dies, you STILL have to pay the bill according to the means test.

WHY CAN'T YOU UNDERSTAND THIS??? Why do I feel like I am talking to a wall with you???

So, you are wrong. Cut and dry. Medical expenses, low income folks, housing protection, elder care, etc are all considered within the means test.

BS, they are not, you have not shown that they are, YOU are wrong. This isn't "opinion", this is FACT!!!!

Time to apologize for part 1. Unless you can show me from the bill specific language where this is not the case.

Then you said I was incoorect about protecting the millionaires:

The bill's utilization of the means test is adding more scrutiny to cases where the debtor has a wage higher thant the state average:

Section 104 of the bill states: Please notyice #2 in regard to additional CRIMINAL penalties for concealment of assets.

Sec. 104) Revises procedural guidelines to mandate a written notice to the individual consumer debtor before commencement of a case stating: (1) the types of services available from credit counseling agencies; (2) the criminal penalties for fraudulent concealment of assets; and (3) that all creditor-supplied information is subject to examination by the Attorney General.

Oh yea, and I see you've completely not looked up asset allocation trusts huh. You see, it is NOT illegal to use these trusts, that is where you are wrong. You completely overlooked the one fact, which I brought out to your attention, and sifted through the bill to try and find something which promotes your point of view.

Millionaires ARE NOT looked at in the same light as a poor person. There is absolutely NO provosion for making an Asset Protection Trust an illegal act under this bill. Just because the bill says the word "fraudulent" does not mean they will treat millionaires the same. Asset Protection Trusts are LEGAL means of a millionaire hiding their money from the IRS, it is the same thing here. There is absolutely NO provision which accounts for this.

Lastly, How does this hurt any of the "little guys" what-so-ever?

They still get debt relief, but have to make affordable monthly payments over a long period of time.

So tell me, do you have any idea what the IRS determines people can pay??? You get an allowance for your rent, utilities, and expenses, everything else is fair game. Yet, somehow, in your alternate reality, you have come to the rational conclusion that a creditor should have the same power over a consumer as the IRS for tax evasion???

Do you truly equate the pains of bankruptcy on the same level as tax evasion???

So tell me again, how the soldier who is fighting over in Iraq right now, and has his wife screwing the whole town and spending his money, HAS to pay back the 100K of debt she rang up on his name??? This bill in fact doesn't even include debt incured because of identity theft!!!! Here is what you have failed to do thus far in this debate.

You FAIL to even acknowledge what the language of the bill is, let alone comprehend the legalize.

You fail to even remotely come up with a single justification for how this bill is fair.

You have not answered any questions about LEGAL means to hide your money ie. asset protection trusts.

You have completely failed to comprehend the fact that somebody with outrageous medical bills due to a death is not covered under chapter 7, and finally,

you have failed to come up with even a marginal defense as to what this bill entails, how it will wreck havok on everyone BUT the millionaires, yet you continue to babble off in your "libertarian" point of view.

You my friend, haven't got a clue when it comes to this bill, what the language actually says and how to even remotely comprehend the legalize in the bill.

Only the highest incomes have to pay anything back and those that really need it get full debt relief, just like they did in chapter 7.

WTF??? Where the hell do you get a statement like this??? Read up on Asset Protection Trusts, here's a good place to start.

http://www.assetprotectioncorp.com/overview.html

Come on Cho, you lost this one if you look at the specific bill. You are dead wrong in every point you have made.

No, in fact I am 100% right on the bill. I have given specific cases about the means test, something you have not shown. I have explicitly stated what the means test does, and how much money it takes to push you over to chapter 13 ($40 dollars a week skin)!!!

You, on the other hand have come up with a quote which does not even defend your position. You have made absolutely no attempt to argue away the FACTS which I presented to you and you have made absolutely no attempt to explain what the means test does. In fact you have done absolutely nothing except for LIE about what this bill does. Yet, somehow, you in your warped world of reality, have come to the sad conclusion that you are indeed right.

I may have mis-judged you. At one time I actually thought you could have a rational discussion with me, but alas you have proven you are just a partisain with all your rhetoric and BS talking points.

As for the means test. . . look it up on google, it is a fact and it is true. This link I posted before is 100% correct.

[chomerics]

Originally posted by skin-n-vegas

Also Larry, How do you know that Cho's example of the means test is correct? Prove it.

How do you know what the hypothetical couple's payment arrangements would be? You claim 5 years at half their income with zero basis in fact.

Skin, look it up, it is there. EVERY site has it listed.

`(iv) The presumption of abuse may only be rebutted if the additional expenses or adjustments to income referred to in clause (i) cause the product of the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv) of subparagraph (A) when multiplied by 60 to be less than the lesser of--

`(I) 25 percent of the debtor's nonpriority unsecured claims, or $6,000, whichever is greater; or

`(II) $10,000.

This is where $40 a week of disposible income comes from.

You can't ignore it just because you don't like it.

[chomerics]

Originally posted by portisizzle

Somehow this debate has turned into a discussion of the details. Chrome, I want you to admit some basic points in order to further this discussion.

1) A person borrows money based on a contract they sign or agree to with another party who has money.

2) A party who lends money does so with the intention of gaining a suitable return. The interest rate and the term of repayment is part of the contract.

3) If the borrower does not pay according to the terms stipulated in the contract then the borrower is in default on the loan.

4) If the borrower does not correct the situation, then the borrower is right in being able to collect the money borrowed based upon the terms of the contract.

Forget bankruptcy for one minute. Are you OK with the basis of the typical loan obligation? If not, where do you disagree, at this point.

Absolutely, this bill is not about basic loan defaults, it is a giveaway to corporate America on the backs of the poor . . . AGAIN :doh:

[SnyderShrugged]

OK, I think I found where our disconnect with each other's premise is.

You are assuming that the bill is explaining the entire means testing format and not simple changes or additions to the current means test.

This bill has proposed changes to the current means test and that is why it seems as if only upcoming medical debts are considered. I can see how you could read it that way.

Please bear in mind that the stipulations of the current means test would remain in effect while the bill's suggested changes would add to the equation.

Income testing.

If you and your family make less than your state’s median income for a similar-sized household, you won’t be affected as much by the new law and can still file for Chapter 7. In California, the median income for a family of four is $63,206, according to the Census Bureau, while the median income for a similar family in Mississippi is $46,331.

Means testing.

If you make more than your state’s median, your hurdles are considerably higher. Essentially, if you have even $100 a month left over after what the bankruptcy court says are “reasonable” expenses, or if you could pay 25% of your bills over five years, you’ll be shunted into Chapter 13.

I think the above is what we both are speaking about, but see it differently for some reason.

[Larry]

cho, an observation,

In the case of, say, a husband who's wife died with a bunch of medical bills, isn't it possible that the debtor is the (dead) wife?

(Maybe husband-wife creates some legal obligation for the other's medical bills. But just to make it certain, maybe you should use the example of parent-minor child, in which case, it's pretty clear that the parent is liable.)

[chomerics]

Originally posted by Larry

cho, an observation,

In the case of, say, a husband who's wife died with a bunch of medical bills, isn't it possible that the debtor is the (dead) wife?

(Maybe husband-wife creates some legal obligation for the other's medical bills. But just to make it certain, maybe you should use the example of parent-minor child, in which case, it's pretty clear that the parent is liable.)

Unfortunately in this case, the person who died would have passed on the burden to their spouse. Any debt obtained by your spouse, is inherreted by you when your spouse passes. So, in this case, the debt is continued to the living member.

There is a loophole out of this though. You have to get a divorce, and give all of the debt to the person who is ill. Then there is no legal grounds to go after the surviving spouse, since they are no longer a spouse.

It's a really crappy thing to even contemplate, espcially at a time of need, but there is a loophole out for the unfortunate. The problem is that many of these people would never even consider doing this because they have a lot more important things on their mind.

[chomerics]

Originally posted by skin-n-vegas

Income testing.

If you and your family make less than your state�s median income for a similar-sized household, you won�t be affected as much by the new law and can still file for Chapter 7. In California, the median income for a family of four is $63,206, according to the Census Bureau, while the median income for a similar family in Mississippi is $46,331.

Means testing.

If you make more than your state�s median, your hurdles are considerably higher. Essentially, if you have even $100 a month left over after what the bankruptcy court says are �reasonable� expenses, or if you could pay 25% of your bills over five years, you�ll be shunted into Chapter 13.

I think the above is what we both are speaking about, but see it differently for some reason.

Yes, this is where the problem is with the bill. It is the main reason for the bill, and it basically eliminates chapter 7 for anyone who works.

[Larry]

I think what s-n-v is saying is, the means testing doesn't kick in, unless your income is above the median.

Which would change some of the numbers. (Or at least make them somewhat more geographic-specific).

Although, I also notice, he's talking about median incomes for a family of four, whereas the example you posted (and I've been quoting) is for a couple.

[iheartskins]

From today's Personal Journal:

Bankruptcy Bill May Spur

More Chapter 11 Filings

DOW JONES NEWSWIRES

March 15, 2005; Page D2

High-end individuals in financial distress may want to consider a Chapter 11 bankruptcy, long the haven of corporate debtors, because of new restrictions in the recent bankruptcy legislation.

At present, most individuals file under Chapter 7 of the U.S. Bankruptcy Code, a relatively simple way to avoid creditors and erase debt. The bankruptcy legislation would compel more individuals in debt to file under Chapter 13, which requires filers to repay part of their bills with regular payments over five years.

The new legislation would make it tougher for individuals to qualify for a Chapter 7 bankruptcy filing. Filers with income higher than their state's median income could find themselves forced into Chapter 13, which also can force individuals to allocate their disposable income to the repayment plan. Among other provisions, credit counseling would be required. Under the current bankruptcy code, a person can file under Chapter 13 if he or she owes unsecured debts of less than $307,675 and secured debts of less than $922,975.

Unlike Chapter 13, individuals aren't required to be in Chapter 11 for a mandatory period of time, says Karen Gross, a bankruptcy professor at New York Law School. There is also no trustee involved in a Chapter 11 plan, which means an individual would have more opportunity to negotiate a suitable plan with creditors, she says. With the new bankruptcy legislation, "Chapter 11 will become an increasingly interesting alternative," she says.

Few individuals file under Chapter 11, which often is associated with corporate giants such as Enron Inc. and WorldCom Inc. Chapter 11 cases are generally more complex, with more procedural hurdles to leap. The filing fee and attorney fees also are higher.

The number of Chapter 11 filings in 2004 totaled 10,132, according to data from the Administrative Office of the U.S. Courts. Only a small fraction of those filings were individuals, the American Bankruptcy Institute estimates.

That could change with the bankruptcy legislation, which passed the Senate on Thursday and is expected to pass the House next month.

Joseph Baldiga, a partner at Mirick O'Connell LLP who heads the firm's bankruptcy group in Westborough, Mass., plans to advise clients who want to preserve their assets or future income to consider filing under Chapter 11. By being able to negotiate with creditors, "there's a sense [debtors] retain more control and flexibility," he says.

Other bankruptcy experts don't see much changing for individuals with high net worths as a result of the bill, which President Bush is expected to sign. George H. Singer, a partner in the bankruptcy group at law firm Lindquist & Vennum in Minneapolis, says such individuals often prefer the less cumbersome Chapter 13 filings but are forced to file under Chapter 11 because their debts are too high. "All in all, I can't see people saying in light of this bankruptcy legislation, 'Get me into Chapter 11,' " he says.

Howard Bader, a partner and bankruptcy specialist at law firm Ballon Stoll Bader & Nadler in New York, cautions that it may be too soon to judge the impact of the legislation's restrictions on Chapter 13. "You really have to see how some of these new rules flush out and how the judges are going to look at this," he says.

Source: Wall Street Journal

[iheartskins]

One last one from the Economist:

Now pay it back

Mar 10th 2005 | WASHINGTON, DC

From The Economist print edition

At last, Congress gets tough on debtors

LAST year, nearly 1.6m Americans filed for relief from their creditors. That number has almost doubled in the past decade. Under current law, people get their debts wiped away by the mere act of filing under Chapter 7 of the bankruptcy code. But a new law, the Bankruptcy Abuse Prevention and Consumer Protection Act, makes that much harder. It imposes a means test that would force people who earn more than their state's median income into Chapter 13 of the code, which requires debtors to submit to a repayment plan. It would also make poorer debtors jump through many more hoops to get relief.

As The Economist went to press, the bill looked likely to pass the Senate. The Republicans had fended off nearly every Democratic bid to soften it. They also voted down an attempt by Chuck Schumer, the senior senator from New York, to tack on a provision blocking violent protesters, including those protesting outside abortion clinics, from filing for bankruptcy in order to avoid fines. (This amendment had sunk the bill in previous years, when pro-life House Republicans revolted.) Now the bill is in a shape both the House leadership and George Bush say they will accept. But is it a sensible reform?

America's 30-year-old bankruptcy law—as Democrats and consumers' groups point out—is rooted in the idea of a “fresh start” for honest debtors who have had a spot of bad luck—illness, divorce, a lost job. But credit-card issuers and banks have long been pushing for a change. The stigma of bankruptcy, they argue, has eroded, and Chapter 7 is too often used as a financial planning tool. Meanwhile, honest borrowers are forced to pay a “bankruptcy tax” in the form of higher interest rates and credit-card penalties.

Is the system really abused? In fact, evidence suggests that the boom in personal bankruptcies has more to do with the piling on of consumer debt than with debtors playing the system. In the 1990s, revolving debt (mostly credit-card debt), grew by as much as 12% a year; from 1980 to 2004, it increased nearly 15 times. And the non-partisan American Bankruptcy Institute puts the number of bankruptcy filers who could afford to pay a good chunk of their debts at 3.6%: still a big number, but not nearly as much as the 10% or more claimed by creditor groups.

In any case, the bill's means test (an average of the debtor's past six months of income) should catch those who can clearly pay up. But opponents fear that the test, which they think too harsh and arbitrary, will drag those who rightly belong in Chapter 7 unfairly into court.

More troubling is the part of the legislation that makes it harder for poorer debtors, not likely to be the abusers of the system, to file for bankruptcy. Some 84% of all filers are too poor to qualify for the new law's means test. But they will still be put through a great deal of rigmarole to get relief. For example, all debtors will have to get credit counselling before they file—a costly process, and one which does little to steer people out of bankruptcy. The bill also requires people to produce all sorts of paperwork, from payroll stubs to tax returns. Those who have not kept strict records will have to give up or pay for a lawyer to plead their case in court.

Other quirks of the legislation make one wonder why credit-industry groups are so keen on it. One loophole allows rich debtors to go on shielding assets in special trust accounts that are legal in a few states. And debtors' fancy homes in Texas and Florida will still be off-limits to creditors. The bill's backers say that fear of trampling on states' rights stopped them closing such loopholes. But it smells rather pervasively like special treatment for the rich.

Source: Economist

[chomerics]

I heart, thanks for the article from the economist. It pretty much sums up the bill. The economist is a great magazine, with some really good articles. This is one of them.

[jbooma]

Originally posted by Art

The lending institution never has any blame for a person who spends more than they should and has difficulty. A lending institution is out to make money and give credit and loan money to people.

Bingo, these are companies trying to make money as well, you can't fault them. Now I do wish they passed the bill that would say on your credit card how long it will take to pay it off if you pay the basic amount.

The problem here is we need to teach the youth the dangers of getting plastic, and how to use it.

I think in college everyone should be forced to take a basic class teaching you about mortgages, debt, credit, etc....

The parents also need to be a better example for their children, not living off of credit cards etc.....

Most find out the hard way what to do, and by then their credit is in the trash.

The common rule of thumb is don't buy something you can't afford, no matter how nice it might look on your wall, or in your backyard etc....

Credit is a great tool if you know how to take advantage of it, but don't abuse it or it is worse then any drug known to man.

If you have more then 2 credit cards, that might be too much, depending of course on your situation and what you use them for. The goal is to have 0 balance each month if possible.

[chomerics]

Booma, the debate is not about the reckless spender, but the legit bankruptcy case which gets ignored in this system.