Has The Definition Of Bankruptcy Been Changed By Congress?

Has The Definition Of Bankruptcy Been Changed By Congress? "With so many individuals filing for bankruptcy, creditors and debtors equally have posed the question, ""What is bankruptcy's true purpose?"" Congress originally stated that the purpose of bankruptcy was to provide debtors with a ""fresh start."" As a result of the numerous modifications to the bankruptcy code over the past few years, many individuals are questioning the purpose of bankruptcy. Recently, the Supreme Court stated that the purpose of the 2005 amendments to the bankruptcy code was to ensure that debtors would repay as much as they could afford to their creditors.Prior to the creation of bankruptcy, societies believed that a debtor must repay their entire debt to their creditor, no matter what. Many countries used debtor's prison as a form of hostage-taking in the hope that the imprisoned person's friends and family would gather together the funds to pay off their debts. The courts determined that the best method for bankruptcy to function was to seize all of the debtor's assets and sell them so that each creditor receives an equal share of the proceeds. The United States did not enact its first modern Bankruptcy Act until 1898. In its modern form, bankruptcy was designed to provide a debtor with a fresh start. Congress believed that giving a deeply indebted individual a second opportunity would not only be beneficial to the debtor, but also to society as a whole. The bankruptcy court system has maintained over the years that the fundamental purpose of bankruptcy is to give the debtor a fresh start. Since its enactment in 1978, the foundation of our current bankruptcy code has been amended a number of times.In 2005, Congress modified the bankruptcy law to transfer the emphasis away from the debtor's bankruptcy discharge and toward a system that tends to benefit the creditors. The 2005 BAPCPA added a means test that regulates eligibility for Chapter 7 bankruptcy based on the state's median income and household size. In many instances, it is not a genuine test for bankruptcy eligibility. On the test, the debtor must enumerate all of their monthly expenses and compare them to their income; if they have something left over, the court believes they can pay their debts. If the debtor fails the means test for Chapter 7, he or she will be required to file for Chapter 13 bankruptcy. This is one of the minefields that many debtors must navigate when registering for bankruptcy. In many cases, an experienced bankruptcy attorney will find a way to make it work, if at all feasible. Sometimes, delaying the bankruptcy petition may be sufficient.As bankruptcy law continues to evolve, it appears to increasingly favor creditors. In the past few years, courts have begun limiting the quantity of deductions used to determine eligibility under the means test. This will compel more individuals to file Chapter 13 bankruptcy. This undermines the notion that bankruptcy is intended to provide a debtor with a fresh start. With these alterations to the law, individuals who are on the verge of qualifying for Chapter 7 bankruptcy will be forced into Chapter 13 and set up for failure. It appears that courts are becoming increasingly creditor-friendly. Contact a bankruptcy attorney to determine if there is anything that can be done to rectify the discrepancies so that you can pass the means test.
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