A new bankruptcy law had stalled in Congress due to a controversial amendment that prevented abortion protesters from filing for bankruptcy to avoid paying court-ordered fines for violence against abortion clinics.
There are different types of Bankruptcy filings-Chapter 7 which consists of liquidation (sale of a debtor's nonexempt property) and distributing the proceeds amongst the creditors. Then there is Chapter 13 bankruptcy, which involves adjustment of debts for someone with regular income and includes a court-mandated plan to repay a portion of the debt.
People with little or no income or assets may file a Chapter 7 bankruptcy and have all debts erased entirely after certain assets are given up. This may be good for the debtor, but at what cost to the creditor or the rest of the credit using community to whom the costs of these bad debts are passed on. When some people seem to be getting a free ride in bankruptcy, the rest of us are being required to pick up the slack.
The news is filled with criminals who use this very system, exploiting its loopholes to rid themselves of debts to their victim's families. Very seldom are court-ordered payments actually fulfilled, simply because the person was allowed to file bankruptcy.
A homeowner rents out a house to someone who stops paying rent after a few months, but continues to occupy the premises until they are physically evicted by the Sheriff's department. They have left the house in a shambles; holes in the walls and ceiling, broken doors, graffiti and grime covering every available surface. Costs for repairs to make the property inhabitable again runs into the thousands of dollars. The owner hires an attorney and files for back rent and damages. The court orders the renter to pay. The homeowner receives the first small payment; but before the check can be cashed, the money has to be returned because the renter has filed bankruptcy and is absolved of all debts..the American Way.
However, not all bankruptcies are filed with calculated disregard and dishonesty. Many people, especially in the economic slump we are all now facing, are forced to file bankruptcy due to job loss, huge medical debts, caring for elderly family members or sick children. Cases cannot be lumped together in a one-size-fits-all' category. There has to be a way to separate the get something for nothing' few from the consumer who has fallen on hard times due to no fault of their own.
Anyone contemplating bankruptcy and still has credit cards at their disposal should avoid using them, as there are laws now that will still allow the credit card companies to collect on these purchases. Seek a good bankruptcy counselor before making the final decision to file and get help choosing the chapter level that best fits your case.
tweet this!
