The New Bankruptcy Laws Are All About Numbers

People are Not Numbers

When numbers are used to identify people, it’s usually when they are in prison.

The Bankruptcy laws used to be about helping out people (and businesses) in need.

They were about equitable solutions to serious financial problems.

Laws in general are designed to help society as a whole, but one must never forget it is always about people.   When a potential bankruptcy client comes into my office with debt problems, it is very personal to them.

Most of my clients never imagined being in this situation, and they would hope that the laws (and their attorney) are there to treat them as individuals, and not numbers.

The New Bankruptcy Laws

Back in 2005 the Republican controlled Congress and President G.W. Bush passed sweeping changes to the Bankruptcy Code that had been in existence for several decades prior.   These “new bankruptcy laws” were designed to reduce bankruptcy eligibility to a numbers game instead of basing it on need and the overall good for society.

Prior to 2005 the overriding purpose of the bankruptcy laws was one of equity.   I discussed courts of equity in my bankruptcy alphabet post on Justice.   Bankruptcy judges at that time had far more ability to balance the needs of a bankrupt debtor to get a fresh start with the rights of the creditors to get paid.

With the new bankruptcy laws, Congress instituted a very complex “means test” to determine threshold eligibility to file under Chapter 7.  The means test, in its base form, takes any and all income received by the debtor in the six calendar months prior to filing the bankruptcy case and subtracts from that certain expenses allowed under IRS guidelines (one size fits all, apparently).

The Saving Grace is Attorneys

While bankruptcy attorneys are of course bound by the laws, experienced ones have figured out where the laws can be applied beneficially for their clients and how to maximize the effectiveness for their specific case.

Similarly, while Congress tried to reduce the flexibility bankruptcy judges have to make equitable rulings, there is still plenty of room for Judges within the laws to do Justice and reach a fair and just result in each case, hopefully never forgetting these are people, not numbers in front of them.

The best way to avoid being just a number in the bankruptcy process is to hire a bankruptcy attorney that understands where the laws have been, where they are, and where they may be going.

This article is part of my bankruptcy alphabet series

Image Courtesy of lrargerich