excerpt from http://newsandinsight.thomsonreuters...ass_conundrum/
....Middle class Americans cannot receive a Chapter 7 discharge because they earn a steady income (or are stuck in the “gap period”), they are being forced to bear the burden of health care costs, their home states are utilizing money earmarked for relief and they will also be required to pay higher taxes unless immediate action is taken.
The issue du jour regarding these matters is why do we care? Should the country be concerned that the only relief available to the middle class is through a Chapter 13 case dedicating their supposedly “disposable income” through a plan for the next 3-5 years? Resoundingly, the answer is yes.
The middle class is not undertaking to commit a fraud against their creditors. The middle class has unquestionably been pummeled from higher medical costs, unmatched job loss, reduction in income, higher taxes and banks that are unwilling or unable to refinance indebtedness with respect to property underwater. As credit scores erode with the incurrence of medical debt, consumer debt, mortgage debt, or otherwise insurmountable debt; the cost to the middle class increase, leading to insolvency notwithstanding incomes above the state median.
These are the innocent debtors that the Bankruptcy Code was intended to provide a “fresh start.” But, as the law currently stands, these debtors are trapped unless action is taken.
It seems to us that the right thing to undertake at this time is to revisit BAPCPA to facilitate debt reduction to allow middle class individuals and families who have suffered in the recent economic crisis to attempt to discharge their indebtedness. The financial burden of BAPCPA on the middle class has greatly outweighed the purported fraud prevention benefits. The Bankruptcy Code and those entrusted with its protection are already empowered to prosecute fraud through Sections523 and 727 of the Bankruptcy Code. The current economic crisis has brought to light the limitations of BAPCPA and immediate changes to the Bankruptcy Code are required to restore the middle class and revitalize their purchasing power.
The middle class is in desperate need of financial breathing room from the economic policies preventing its growth. Revisions to the Bankruptcy Code, including the elimination of the Means Test, reducing the discharge bar to 6 years, strengthening the powers of Section 707(b)(3) and raising the debt limits in Chapter 13, will undoubtedly alleviate the financial squeeze placed on the middle class as well as to facilitate buying power for the shrinking middle class.
The government policies explored above — the Means Test, extended discharge period, higher medical costs, diversion of settlement funds and higher taxes — have created a virtual economic debtor prison incarcerating the middle class for the foreseeable future. There are numerous policy issues for the lending and medical communities that are at risk here and the impact of any potential revision of the Bankruptcy Code cannot be minimized.
However, the middle class is the engine for the growth of our economy in the United States. The impact of the recession continues to harm those who have carried this country for decades and to continue to force those who can never repay their bills into an economic incarceration does not seem fair, right or American.
....Middle class Americans cannot receive a Chapter 7 discharge because they earn a steady income (or are stuck in the “gap period”), they are being forced to bear the burden of health care costs, their home states are utilizing money earmarked for relief and they will also be required to pay higher taxes unless immediate action is taken.
The issue du jour regarding these matters is why do we care? Should the country be concerned that the only relief available to the middle class is through a Chapter 13 case dedicating their supposedly “disposable income” through a plan for the next 3-5 years? Resoundingly, the answer is yes.
The middle class is not undertaking to commit a fraud against their creditors. The middle class has unquestionably been pummeled from higher medical costs, unmatched job loss, reduction in income, higher taxes and banks that are unwilling or unable to refinance indebtedness with respect to property underwater. As credit scores erode with the incurrence of medical debt, consumer debt, mortgage debt, or otherwise insurmountable debt; the cost to the middle class increase, leading to insolvency notwithstanding incomes above the state median.
These are the innocent debtors that the Bankruptcy Code was intended to provide a “fresh start.” But, as the law currently stands, these debtors are trapped unless action is taken.
It seems to us that the right thing to undertake at this time is to revisit BAPCPA to facilitate debt reduction to allow middle class individuals and families who have suffered in the recent economic crisis to attempt to discharge their indebtedness. The financial burden of BAPCPA on the middle class has greatly outweighed the purported fraud prevention benefits. The Bankruptcy Code and those entrusted with its protection are already empowered to prosecute fraud through Sections523 and 727 of the Bankruptcy Code. The current economic crisis has brought to light the limitations of BAPCPA and immediate changes to the Bankruptcy Code are required to restore the middle class and revitalize their purchasing power.
The middle class is in desperate need of financial breathing room from the economic policies preventing its growth. Revisions to the Bankruptcy Code, including the elimination of the Means Test, reducing the discharge bar to 6 years, strengthening the powers of Section 707(b)(3) and raising the debt limits in Chapter 13, will undoubtedly alleviate the financial squeeze placed on the middle class as well as to facilitate buying power for the shrinking middle class.
The government policies explored above — the Means Test, extended discharge period, higher medical costs, diversion of settlement funds and higher taxes — have created a virtual economic debtor prison incarcerating the middle class for the foreseeable future. There are numerous policy issues for the lending and medical communities that are at risk here and the impact of any potential revision of the Bankruptcy Code cannot be minimized.
However, the middle class is the engine for the growth of our economy in the United States. The impact of the recession continues to harm those who have carried this country for decades and to continue to force those who can never repay their bills into an economic incarceration does not seem fair, right or American.
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