The United States Constitution grants to the federal government, i.e., Congress, the exclusive right to make uniform laws on the subject of bankruptcy. U.S. Constitution, Article 1, Section 8. The grant to make such laws was not obligatory to the U.S. Congress, but discretionary. For several decades in our nation’s history, there were no bankruptcy “laws.” In 1898, Congress enacted the original bankruptcy code—well over 100 years after the Constitution was ratified.
When I began practicing in the mid-1980’s, it was evident Congress believed the 1978 Code made filing for bankruptcy relief too easy for people suffering from indebtedness. So began the political changes which resulted in the Bankruptcy Reform Act of 2005. This legislation moved the pendulum to the other extreme and many bankruptcy practitioners saw a fatal blow to the favor debtors previously had with obtaining complete debt relief. The new bankruptcy law effectively changed the landscape of the code to mandatory Chapter 13 relief as an escape from loss of employment due to creditor levies and garnishments. With the advent of a mandatory “means test” based upon the debtor’s gross income (as opposed to reliance on net income before the 2005 changes), it appears thousands of debtors have been forced into a situation which discourages individuals and families from filing at all. If Congress would consider modifications to the means test for Chapter 7, making it more equitable in light of inflation and the current cost of necessary living expenses, we could see a return to a fair solution for consumer bankruptcy filings. Given the current polarization of the political parties in our country, it would indeed take a miracle to see that change—at least in the lifetime of fellow baby boomers.
Attorneys who handle Chapter 7 consumer bankruptcy cases are all too aware of the false beliefs held by the majority of the general public regarding the aftermath of a bankruptcy filing. Those false beliefs include: the debtor’s credit being ruined for years after filing; bankruptcy being shameful or otherwise a “bad thing to do”; the debtor automatically losing their home and vehicles; and the possibility of the “debtor’s prison.” Yes, there are still people out there who actually believe that you can go to jail for not paying your debts.
Consumer bankruptcy attorneys are on the frontline against these common misconceptions. Many of these false beliefs are propagated by debt consolidation companies; ignorant politicians who are totally unaware of the content and principles of the bankruptcy code; and even church parishioners who hold to the belief that filing for debt relief is not prudent and against biblical principles. In any case, the public needs to hear the actual truth regarding the debt relief still available to consumers under the bankruptcy code.
