Bankruptcy Law Makes Filing More Costly but Is It Fair?

Is Bankruptcy Reform Fair?

There is no doubt, since the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005(BAPCPA), bankruptcy reform has made filing for bankruptcy much more costly, but is it a fair bankruptcy reform?

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The idea of regulations and rules is to even the playing field for all the active interactions of players in a game. If we see our daily financial interactions in a similar way, that our lives are made up of American citizens interacting financially with one another, it should not be such a stretch to see us as players in a game of consumption where we compete against one another for survival and supremacy within a given group.

In this scenario, the group is the greater United States, and supremacy involves the American Dream of obtaining wealth and status in life. In our pursuit of happiness through obtaining the American Dream, without rules and regulations to provide law within the competition, we would all be subject to chaotic developments in obtaining our goals brought on by aggressive competitors. The Archbishop of Ireland once said, “Law is order in liberty, and without order liberty is social chaos.”

Bankruptcy Reform is Costly

The BAPCPA was enacted into law because a certain group of American citizens thought the playing field between creditors and debtors had tilted to give the debtors too big an edge in the bankruptcy process. This bankruptcy reform in law focused on the abuse of debtors using the bankruptcy process as a means to escape their duty to pay their debts. Many felt like serial abuse occurred in the frequency of filing bankruptcy. To even the playing field, Congress passed the law mandating a Means Test to qualify for filing a Chapter 7 bankruptcy and for determining how long a Chapter 13 plan was to be made.

The new regulations have come under recent criticism because with all the new laws comes additional costs of administering them. According to a news article published in USA Today and posted on December 22, 2011, “consumers now pay as much as 55% more since the 2005 bankruptcy reform was passed.” Additional costs come in the form of higher attorney fees, court costs, increased paperwork, and added steps like required counseling before and after filing bankruptcy.

Is Not Making the Reforms More Costly in the Long Run?

A certain rank in both bankruptcy professionals and citizenry think the new law is excessive and too costly, but are they fair? Bankruptcy reform or any other kind of reform may be costly, but shouldn’t the real question be, “Is not making the reforms more costly in the long run?”

Bankruptcy laws were never designed to allow deadbeats and criminals to have a loop hole in order to beat their debts. On the other hand, they were designed to allow an honest debtor a chance at a new beginning through forgiveness and a fresh new start.

Bankruptcy reform should be all about providing a balanced approach in dealing with creditors and debtors. If the bankruptcy reform costs more money to provide the even playing field, so be it. This writer thinks this type of effort is not only fair but necessary in providing a stable economy.

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