The Bush Appointee Still on the Job Making Bankruptcy Even Harder
President Biden has renewed the eviction moratorium for another two months, but millions of Americans behind on their rent or mortgage payments still face the prospect of financial insolvency when those two months are up—or sooner, if the moratorium is struck down by the courts.
Many of those households may eventually file for bankruptcy, which could relieve them of certain financial obligations. Bankruptcy is wrenching, humiliating, and traumatic under the best of circumstances. But absent immediate action, decisions made by a tiny office in the Department of Justice may strand millions in a less effective and more costly form of bankruptcy.
For consumer debtors (the majority of whom go bankrupt after experiencing sudden and unforeseen changes in their financial circumstances), the two primary forms of bankruptcy are those laid out in Chapter 7 and Chapter 13. The majority of individual bankruptcy cases are adjudicated under Chapter 7, in which individuals give up the majority of their assets to immediately erase their debts. Other individual debtors opt to file under Chapter 13, which allows individuals to keep their assets and eventually erase their debts through a repayment plan for the next three to five years. However, most debtors who file for bankruptcy under Chapter 13 do not succeed in completing their repayment plan, leaving them even worse off.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) exacerbated problems in the system. For one, it increased filing fees for Chapter 7 bankruptcy petitions. As individuals filing for bankruptcy are cash-strapped, even minor increases in fees can have devastating effects on whether an individual can even file for bankruptcy in the first place.
Read more: https://prospect.org/justice/bush-appointee-still-on-the-job-making-bankruptcy-even-harder/
(American Prospect)