Do Bankruptcy Laws unjustly favor Lenders?
Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. Bankruptcy law provides for the development of a plan that allows a debtor to resolve his debts through the division of his assets among his creditors.
Although the goal of the modern bankruptcy is to allow the debtor to have a “fresh start,” and to be granted relief of some liability, there haven’t been any regulators to protect consumers or debtors since the first Bankruptcy Law that the Congress passed in 1797 which lead to imprisonment of thousands of debtors. And it wasn’t till 1841 that the debtor could ...view middle of the document...
The bill, which passed in the Senate, will make it more difficult to get rid of debts by filing for bankruptcy, forcing tens of thousands of people to work out repayment plans instead. The Means Test which took effect with enactment will set up an income-based test for measuring a debtor’s ability to repay debts. Those with income above the state’s median income who can pay at least $6,000 over five years--$100 a month—will be forced into Chapter 13, where a judge will then order a repayment plan.
The most important aspect of the bankruptcy code was the automatic stay provision. This allowed consumers to file for bankruptcy at anytime during the creditor’s collection process putting an immediate stop to all contact and collection activities from the creditor. The new law requires that a debtor receive and pay for credit counseling from an approved non-profit credit counseling agency for 180 days prior to filing Chapter 6 or Chapter 13 bankruptcy. However, during this same period of time the creditor is not restrained from collection efforts. One story tells an example; Margaret is a homeowner in Jacksonville, Florida and is 6 months behind on her mortgage. As a rule, credit counseling agencies only work with credit card companies and have little or no training with dealing with mortgage companies. After receiving foreclosure papers, Margaret goes to see her attorney to file for bankruptcy and is told that she must first seek credit counseling before filing for bankruptcy protection. Meanwhile, the foreclosure proceeds on schedule and a sale date is set 120 days later. However, Margaret still has not completed her 180 day requirement. What will happen to Margaret’s home? The home will be sold and she cannot stop the sale by filing bankruptcy. One pay check is literally what separates many families from home security and despair and the new bankruptcy law severely punishes those who slip behind on their mortgage payments.
>Report - Protecting Suppliers of ‘Too Big to Fail’ Companies
Bankruptcy judges have the right to reduce and even eliminate creditor claims in virtually all forms of bankruptcy – except when the debt is secured by a prime residence.
The 2009 Bankruptcy Law “Helping Families Save Their Homes in Bankruptcy Act”...