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How Does The New Bankruptcy Law Affect Minorities?
Published In The New Tomorrow November 2005
By Robert Ruiz
The scenario used to be, run all your credit cards to the limit, consolidate your
debts onto one credit card, then run your credit cards to the limit again. Then
when you can’t pay them, you would file for bankruptcy. Congress, the Senate
and George Bush have changed that. With the passing of the Bankruptcy
Reform Bill, past abusers of our bankruptcy laws will have to think twice before
running up their debts. Sounds like a good idea, however, this law also comes
with many controversies. Not everyone who is filing for bankruptcy is cheating
the credit system. Though, I don’t believe the law is targeting our hard
working middle class and poor minorities, but the law definitely affects them
the most.
When filing for bankruptcy, individuals usually filed under chapter 13 or chapter
7. Chapter 7 being the most attractive of the two has been practically
eliminated under this new law. Filing under chapter 7 would literally wipe the
slate away giving you a new start. Under a chapter 7 bankruptcy all your
assets are liquidated and given to creditors and whatever debt was left, was
cancelled. The problem before the change occurred was that most filers had
no assets, which left most credit card companies and other creditors with
nothing. According to statistics over 1.1 million people filed for chapter 7 in
2004.
On the other hand a Chapter 13 bankruptcy would put the individual that filed,
on a repayment plan that may last up to 5 years. According to statistics there
was 445,574 the filed for chapter 13 in 2004.
With the new law there is a qualifying test. Presently it’s up to the court to
determine who qualifies for chapter 7 bankruptcy. The new law dictates that
an individual will under go a two-parts means test. The first part will subject
the individual to a formula that exempts certain expenses to determine
whether you can afford to pay 25% of your debt. The second part will
compare your income to your states median income. If your income is above
the states median income or your expense evaluation shows that you are able
to pay up to $6000.00 in a 6 year period you will not qualify for chapter 7 and
will be sent straight into chapter 13.
Under the old law, when filing for chapter 13, the court determines how much
you can afford to pay, “based on what you and the court deem to be
reasonable and necessary expenses.” Sympathy by the court in many cases
would dictate the outcome.
The New law leaves no room for human sympathy, no matter what the
situation or outcome. The new law allows the IRS to dictate the guidelines of
living standards, to which your repayment plan will be based upon.
Though the bankruptcy laws were out of control with abuses and needed
some sought of reform, the new reform is not taking into consideration job
losses, unemployment, lower salaries, deaths etc.
Where does that leave minorities who are in the red financially because of
these unseen uncontrollable financial obstacles? For instance what happens
to Felicia Rosario who a year ago held a position that paid her almost $80,000
a year, and was laid off last year? Felicia is still trying to find a job that is
going to pay her enough to pay all her bills. Right now she is temping making
below $30,000 a year if that. Felicia is on the brink of filing for bankruptcy, she
is barely making minimum payments on all her bills. She says, “Once her
savings account is depleted, her family might end up losing their house and
the family car.”
Currently Felicia is able to file for chapter 7 and be accepted, however, if she
were to wait, under the new law Felicia would only be accepted for chapter
13. The courts would base her financials against her $80,000 last year salary,
which is way above the New York median.
There are many minorities who will be fed to the wolves just like Felicia. Cases
like Felicia are legitimate cases that must be looked at with sympathy and
realism. Cases like Felicia should not be tackled with a formula that will take
no account in what is happening in the present, a formula that will not take
into account that though she is in financial distraught she still attempts to
make all her payments, a formula that will not take into account that she lost
her high paying job and because of the competitive wage market has not been
able to get a job paying the same.
There are many minorities like Felicia who are a paycheck away from
bankruptcy. What does the government propose for them? They are not
cheating or trying to hustle the credit and banking system, they are people
who make just a little above the median wage and have taken out mortgages
for houses, loans for businesses, or even loans for furthering education. Then
they become sick, lose their jobs, or sometimes even die leaving their families
to deal with the debt. With the bankruptcy safety net gone, the middle class
should prepare themselves for the collection agency vultures who feed off the
financially wounded. Always look up they will be circling lurking and waiting for
the right time to strike.
These people are suffering the consequences of others who are the masters
of capitalistic exploits and took advantage of the system. When all is said and
done the rich will remain rich and the middle class will struggle to exist. Reform
and change should always be welcomed, but only when it includes the realities
of the whole populace. This law by far fails to do that!
About The Author:
Robert Ruiz is an editorial writer who writes for many publications. He is also
the founder and senior editor for Latin Society;silent voices. He also has a
monthly column in The New Tomorrow. Also writes for the web magazine Did
You Really Believe.
Published In The New Tomorrow November 2005
By Robert Ruiz
The scenario used to be, run all your credit cards to the limit, consolidate your
debts onto one credit card, then run your credit cards to the limit again. Then
when you can’t pay them, you would file for bankruptcy. Congress, the Senate
and George Bush have changed that. With the passing of the Bankruptcy
Reform Bill, past abusers of our bankruptcy laws will have to think twice before
running up their debts. Sounds like a good idea, however, this law also comes
with many controversies. Not everyone who is filing for bankruptcy is cheating
the credit system. Though, I don’t believe the law is targeting our hard
working middle class and poor minorities, but the law definitely affects them
the most.
When filing for bankruptcy, individuals usually filed under chapter 13 or chapter
7. Chapter 7 being the most attractive of the two has been practically
eliminated under this new law. Filing under chapter 7 would literally wipe the
slate away giving you a new start. Under a chapter 7 bankruptcy all your
assets are liquidated and given to creditors and whatever debt was left, was
cancelled. The problem before the change occurred was that most filers had
no assets, which left most credit card companies and other creditors with
nothing. According to statistics over 1.1 million people filed for chapter 7 in
2004.
On the other hand a Chapter 13 bankruptcy would put the individual that filed,
on a repayment plan that may last up to 5 years. According to statistics there
was 445,574 the filed for chapter 13 in 2004.
With the new law there is a qualifying test. Presently it’s up to the court to
determine who qualifies for chapter 7 bankruptcy. The new law dictates that
an individual will under go a two-parts means test. The first part will subject
the individual to a formula that exempts certain expenses to determine
whether you can afford to pay 25% of your debt. The second part will
compare your income to your states median income. If your income is above
the states median income or your expense evaluation shows that you are able
to pay up to $6000.00 in a 6 year period you will not qualify for chapter 7 and
will be sent straight into chapter 13.
Under the old law, when filing for chapter 13, the court determines how much
you can afford to pay, “based on what you and the court deem to be
reasonable and necessary expenses.” Sympathy by the court in many cases
would dictate the outcome.
The New law leaves no room for human sympathy, no matter what the
situation or outcome. The new law allows the IRS to dictate the guidelines of
living standards, to which your repayment plan will be based upon.
Though the bankruptcy laws were out of control with abuses and needed
some sought of reform, the new reform is not taking into consideration job
losses, unemployment, lower salaries, deaths etc.
Where does that leave minorities who are in the red financially because of
these unseen uncontrollable financial obstacles? For instance what happens
to Felicia Rosario who a year ago held a position that paid her almost $80,000
a year, and was laid off last year? Felicia is still trying to find a job that is
going to pay her enough to pay all her bills. Right now she is temping making
below $30,000 a year if that. Felicia is on the brink of filing for bankruptcy, she
is barely making minimum payments on all her bills. She says, “Once her
savings account is depleted, her family might end up losing their house and
the family car.”
Currently Felicia is able to file for chapter 7 and be accepted, however, if she
were to wait, under the new law Felicia would only be accepted for chapter
13. The courts would base her financials against her $80,000 last year salary,
which is way above the New York median.
There are many minorities who will be fed to the wolves just like Felicia. Cases
like Felicia are legitimate cases that must be looked at with sympathy and
realism. Cases like Felicia should not be tackled with a formula that will take
no account in what is happening in the present, a formula that will not take
into account that though she is in financial distraught she still attempts to
make all her payments, a formula that will not take into account that she lost
her high paying job and because of the competitive wage market has not been
able to get a job paying the same.
There are many minorities like Felicia who are a paycheck away from
bankruptcy. What does the government propose for them? They are not
cheating or trying to hustle the credit and banking system, they are people
who make just a little above the median wage and have taken out mortgages
for houses, loans for businesses, or even loans for furthering education. Then
they become sick, lose their jobs, or sometimes even die leaving their families
to deal with the debt. With the bankruptcy safety net gone, the middle class
should prepare themselves for the collection agency vultures who feed off the
financially wounded. Always look up they will be circling lurking and waiting for
the right time to strike.
These people are suffering the consequences of others who are the masters
of capitalistic exploits and took advantage of the system. When all is said and
done the rich will remain rich and the middle class will struggle to exist. Reform
and change should always be welcomed, but only when it includes the realities
of the whole populace. This law by far fails to do that!
About The Author:
Robert Ruiz is an editorial writer who writes for many publications. He is also
the founder and senior editor for Latin Society;silent voices. He also has a
monthly column in The New Tomorrow. Also writes for the web magazine Did
You Really Believe.
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