Despite the efforts of banks and legislators to establish a modern version of debtor's prison, the number of bankruptcy filings continues to rise. The purpose of the 2005 bankruptcy reform legislation was to reduce the number of individuals filing for debt relief by making it more difficult to eliminate debts. If borrowers failed to satisfy the new criteria, they would be required to repay a portion of their accounts to their creditors.
Prior to the implementation of the 2005 act in 2006, a record number of debtors filed for bankruptcy under the old laws. Once the new law went into effect, filings dropped significantly for a time, but since 2006 have been steadily increasing. And with tens of millions of Americans currently unemployed and confronting enormous amounts of debt, bankruptcy filings have essentially returned to their pre-reform levels.
With the implementation of the new bankruptcy laws, straightforward Chapter 7 debt discharges were expected to decrease. A means test was administered as part of the filing requirements, and if the debtor failed the test, they were forced into Chapter 13 bankruptcy if they still desired court-ordered relief.
Although the means test may have prevented some borrowers from filing for Chapter 7 bankruptcy, the high unemployment rate has ensured that a large number of individuals simply lack the financial resources to pay their debts. For these individuals, discharging their debt may be the only method to avoid bank or collection agency collection actions. And because they have no means to pay their debts, they are able to pass the court's test and file for Chapter 7 bankruptcy.
Thus, banks have always sought to prevent borrowers from registering for Chapter 7 bankruptcy and having all of their debts discharged. Even if the debtors have no assets or income, lending institutions would prefer to be able to sell the debts or prosecute the borrowers in order to obtain judgments and garnishments. If filing for bankruptcy is an option, banks would prefer a Chapter 13 repayment arrangement as opposed to a discharge.
With no end in sight for the recession and the government rewarding banks for making poor loans to consumers, it is likely that the number of bankruptcies will continue to rise. Americans do not have employment or assets because they are compelled to subsidize banks that continue to make poor lending decisions and then seize the nation's capital and assets for themselves.
" - https://www.affordablecebu.com/
