Article: A Call for Bankruptcy Reform: A Message to the Presidential Candidates from 'We the People'

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In 2005, a charade took place on the floor of the House and Senate. It is now called the “Bankruptcy Abuse Prevention and Consumer Protection Act” (BAPCPA). Proponents willfully deceived the American people in arguing that the bill would ‘protect consumers’ from those who abuse the system.

The new law strengthened bankruptcy laws not for we the people, but for creditors who make it a business practice to exploit American consumers for the purpose of profit and gain.

Assault on the Middle Class

I have never wondered why our congressmen and women are called “Representatives,” not is it a mystery as to why the body of government to which they are elected is called the “House of Representatives.” It is our Congress’ sole duty to serve the interests of the people who sent them to Washington.

The framers of our Constitution gave Congress the power “to establish… uniform Laws on the subject of Bankruptcies throughout the United States, (Article I, Section 8)” not for the protection of creditors, but in order to protect hard working citizens. However, the BAPCPA is a perversion of ideals.

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When signing the act into law, President Bush said, “In recent years, too many people have abused the bankruptcy laws. They’ve walked away from debts even when they had the ability to repay them. This has made credit less affordable and less accessible, especially for low-income workers who already face financial obstacles. The bill I sign today helps address this problem.”

His words could not be further from the truth. Less than 2% of all bankruptcies filed were filed under fraudulent motives.

Unlike when they issue credit, the credit companies perform a number of income, asset and debt verifications when a consumer files for bankruptcy. They have the right to interview the consumer, while under oath, and they receive a representative from the US government to look out for the interests of the creditors during the bankruptcy proceedings. All of this before the BAPCPA.

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What the actions of the Congress and the President have done, in actuality, is place the “low income workers” in a state of financial bondage. If their jobs are lost, if they get sick, if a spouse dies, they cannot file bankruptcy protection to protect their assets thanks to the true constituency of the House and Senate; the greedy gluttonous creditors, who now can and do take their home, vehicles, and any other assets.

BAPCPA Constrictions: Income as a litmus test to file Chapter 7

As a former professional credit counselor, I was a training specialist for the largest non-profit credit counseling agency in the country. I developed training material to ensure that my agency was certified by the Executive Office of the United States Trustee (EOUST). At one time, I referred several of my clients to seek legal advice regarding a Chapter 7 bankruptcy on a daily basis. I am intimately familiar with the circumstances surrounding bankruptcy and the provisions of the BAPCPA.

A Chapter 7 Bankruptcy allows a consumer to receive full debt relief from creditors, and write off unsecured debts. If the debtor owns assets, the assets may be used as compensation to creditors.

The BAPCPA prevents average Americans who need creditor protection under the full extent of the law from receiving this right that the framers of the Constitution clearly envisioned by requiring applicants to earn less than the median amount of income for the state. Taking into account even part-time employment, this number is always below any livable wage, often times less than $19,000 a year. All other consumers are forced into a constrictive Chapter 13.

In a Chapter 13, consumers are forced to pay all income that is in addition to their housing and food costs to a trustee, who in turn disburses it to the creditors. This provides no emergency income in the event of the smallest surprise, such as a flat tire. As a result, two thirds of Chapter 13 bankruptcies fail in the first year.

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BAPCPA supporters ignore the facts in falsely claiming that the bankruptcy system was ever abused. The top three causes for the filing of Chapter 7 Bankruptcy are medical expenses, which typically surround medical emergencies, such as cancer or automobile accidents; divorce, and reduction of income, and layoffs. All of these causes for bankruptcy are completely out of the control of the consumer and are subject to misfortune, random chance, and swaying markets.

The typical scenario…

Suppose a two income family (the Johnsons) has an income of $100,000 a year. The husband makes $50,000 a year at the Post Office, while the wife makes $70,000 a year as a programmer. They have two children, two cars, and a mortgage. Their savings, debts, and expenses are reasonable for their income.

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