Bankruptcy And The American Consumer
Many around the country are suffering under mountains of debt and living in homes that are no longer worth the loans they are still responsible for. Many more are filing for unemployment and discovering that the jobs market is still struggling under the weight of the last three years of unemployment numbers that have steadily increased while fuel, food and medical care cost’s have risen.
Because of these factors many Americans have made the decision to file for bankruptcy in the hope that they will some how alleviate their burden.
Many are finding that this process does less to alleviate their burden and more to actually increase their debt requirements while putting them under more scrutiny by the Federal Government and their debt holders. In April of 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This legislation made a substantial change to the Bankruptcy code and forever changed the playing field for the American consumer.
In the eight years prior to the President signing the legislation into law, Banks and credit card companies pushed Congress to get laws put in place to force consumers to pay all of their debt including interest to their debtors. What the law really achieved was forcing all Americans to pay debt including medical bills during a time when they no longer had the means to pay the debt.
Bush stated that “The law made the financial system fairer for debtors and creditors”. Those who fought the bill’s passage said “the change will fall especially hard on low-income working people, single mothers, minorities and the elderly and will remove a safety net for those who have lost their jobs or face crushing medical bills”. That is more apparent today when most families can not afford the high cost of health care and are one paycheck away from sliding into a never ending debt pit with no means of escape.
Under the BAPCPA law, those with insufficient assets or income could still file a Chapter 7 bankruptcy, which, if approved by a judge, erases debts entirely after certain assets are forfeited. Those with income above their state’s median income who can pay at least $6,000 over five years — $100 a month — would be forced into Chapter 13, where a judge would then order a repayment plan. Most who file for chapter 7 in Bankruptcy court are forced to change their claim to a Chapter 13 filing. A chapter 13 filing requires that the debtor meet with a U.S. Trustee or a Bankruptcy Administrator.
Within 60 days of filing the bankruptcy notice the Trustee schedules a meeting between the debtor and their creditors. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan. Once the debtor and creditors have agreed on a payment plan they then go before a judge who approves the final plan which puts into motion the debt repayment cycle.
During the debt repayment cycle the debtor is held under scrutiny by creditors and trustees who enforce the repayment schedule. Individuals can use the Chapter 13 procedure to save their home, an automatic stay is placed over the loan holder once the petition has been filed. After the filing of the petition and the automatic stay is in place the debtor may bring their payments current over a reasonable amount of time. The debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition.
Those who choose bankruptcy should research thoroughly all of the laws and requirements in place before going forward. Bankruptcy no longer brings relief to those in debt the way it once did, including those who owe debt for medical bills they incurred due to lack of health care.
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