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You are here: HOME>>NEW BANKRUPTCY LAW-MEANS TESTING - PART TWO |
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The “Means Test” - a hard line provision Atlanta bankruptcy lawyer Jonathan Ginsberg explains that a core provision of the new bankruptcy law is a “means test” whereby persons with income above what amounts to survival levels could not file Chapter 7 to liquidate debts. “If your family income for a family of 4 exceeds around $58,000, Chapter 7 will most likely not be available to you,” comments Ginsberg. “Supporters of this proposed new law seem to believe that anyone who earns a living just barely over survival level should have to experience what I can only characterize as humiliation if they need to file for bankruptcy.” “Under the new law, your monthly expenses must conform to very rigid budget standards,” explains Ginsberg. “These budget figures are derived from the same budget standards used by the IRS in tax evasion cases. According to Ginsberg, the most extreme elements of the IRS standards have to do with home ownership. “In Fulton County, Georgia, notes Ginsberg, the IRS/bankruptcy standard would permit a family of 4 to spend $1,948 per month for housing and utilities. If electricity, gas and water cost $500 per month, that only leaves $1,448 for mortgage payments. Many of my middle class clients have two mortgages that total close to $2,000 alone. It appears that the new law will hit the middle class homeowner hard.” As a practical matter, potential bankruptcy filers should need to prepare to surrender their homes, cars and even furniture and appliances and survive within a very modest lifestyle in exchange for bankruptcy protection. “Even emergency expenses arising from a medical crisis would not be dischargeable if you used credit cards within three months of filing,” warns Ginsberg. “This type of outrageous limitation should give you a sense what this new law is all about.” Expect Complicated Procedures In addition to the proposed limitations on filing, people who can file will find the process much more complicated and expensive. The new law, for example, requires debtors to include documents such as pay stubs and three years of tax returns along with the bankruptcy petition. Failure to include this documentation is grounds for dismissal. Interestingly, this particular requirement - that of supporting documentation - is extremely unpopular with Bankruptcy Judges and the Trustees who administer the system. A local trustee in the Atlanta Bankruptcy Court explained to attorney Ginsberg that his office had neither the storage space to keep this documentation or the personnel to review it. Looks More Like Punishment than Reform Ginsberg believes that most people recognize that bankruptcy should be a last resort and that filers who can pay back their bills ought to do so either voluntarily or in a 100% pay out Chapter 13. Time Magazine’s research as well as the personal observations of the attorneys and staff at Ginsberg Law Offices, refute the charge that large numbers of people abuse bankruptcy. With few exceptions, most people who file bankruptcy do so out of necessity. Most work to support their families and have been forced to file because of an unexpected illness, a job loss, a divorce or a bad financial decision. Ginsberg also points out that nothing in or associated with the bankruptcy reform bills passed by Congress address the credit industry’s tactics of offering easy credit through constant solicitation and teaser introductory rates. What You Can Do At Ginsberg Law Offices, we encourage our clients to contact their Senators and Representatives to demand changes to the hard line provisions of this new law. You should also know that both Democrats and Republicans have accepted thousands of dollars from the credit card industry and that support for these pending bills is bi-partisan. Money, it appears, has no political preference. We encourage you to contact your elected representatives by letter or e-mail. Express your dissatisfaction with this change to the nation’s bankruptcy Click here for the addresses and e-mail links to Senators Chambliss and Isakson along with several local Members of Congress. Your vote is the only meaningful response to millions of dollars in special interest campaign contributions. Your elected representatives will respond to your letters and calls. We urge you to contact your elected representatives now!
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