Comments on: I Missed This Anniversary — Bankruptcy ‘Reform’ Is a Year Old

By: Tracy Coyle

Tracy Coyle — Fri, 20 Oct 2006 16:17:29 +0000

The option to file CHAPTER 7 goes away if your income is above the median and you fail the means test. I will offer some clarification on ‘failing the means test’. If you have an income above the median for your area, you must take the means test. (If your income is below the median, you do not - however an abbreviated version is used to show you are below the median) The means test has allowances for taxes, insurance, expenses and (importantly) secured debts. If these allowances reduce your net monthly income below the median, you can file a chapter 7. You can however, still file a chapter 13 if you choose or need to. (So two families with exactly the same income and exactly the same debt load - BUT, one family the debt is secured and the other only credit card - could have different results from the means test.)

I better check that I haven’t crossed the UPL line!

By: TBlumer

TBlumer — Fri, 20 Oct 2006 04:05:51 +0000

#1, I thought it was very clear that the option to choose 13 was going to go away if you *flunked* the Means Test. I can’t cite a source, but it was all over the place at the time.

I also didn’t know you could yank a house out of foreclosure by filing for banktuptcy. Now I do. Your premise makes perfect sense (as usual).

#2 Jeff, I agree that the econ in general is in very good shape, but also think there is a core group of people that remain very vulnerable, esp certain of the uninsured for health care and those who got sucked into subprime or option ARM loans when they really couldn’t afford them.

By: Jeff Michael

Jeff Michael — Fri, 20 Oct 2006 02:44:30 +0000

I still agree with you that there weren’t a significant number of deadbeats gaming the system, though people I trust who are connected to the industry tell me that there’s more fraud going on than people realize.

That said, I agree with your basic point, that people are by and large honest and ethical, and they are choosing Chapter 13s when they can because they want to repay some part of their debts if possible. In some parts of the country, chapter 13s were on the rise even before BAPCPA.

Anyone who reads your blog knows the real numbers and can see that the economy is in way better shape than the media is letting on. I’d submit that bankruptcy rates are down because of the healthy economy and the (uneccessary, as it turns out) pre-BAPCPA flood of filings in 2005, and not being artficially suppressed by any provisions of BAPCPA itself.

By: Tracy Coyle

Tracy Coyle — Fri, 20 Oct 2006 02:35:29 +0000

What part of the law are you reading??!? Repayment of debts is always the preferred way so no law is going to prevent it, force it under certain circumstances yes.

It is interesting that if 95% of filers are below the median and 40% are filing chapter 13, a lot of people are filing for some other reason than they feel some obligation to do so.

And what is the primary reason people file chapter 13? To save an asset…like a house…in foreclosure. In other words, the higher chapter 13 filings is not because the law encourages it, but because foreclosures have gone through the roof!