Bankruptcy window about to close

owner of an eBay Internet auction consignment business in Paradise
If you are unable to pay your bills and are thinking about bankruptcy as a way to get back on your feet but have been putting it off for moral, ethical or personal reasons, then I recommend you wait no longer. Run, do not walk, to your local bankruptcy attorney. Now is the time to file. The law is changing.

For the past five years the American banking and credit card industries have worked to get personal bankruptcy laws changed. They are trying to make it harder for individuals to free themselves from debt and begin life anew, without the burden of unredeemable and excessive debt. Last week, in the House of Representatives, they came within a vote of doing just that.

The House had passed a bill that would, in effect if not in name, eliminate the personal use of a Chapter 7 bankruptcy, which allows an individual to forfeit most of his remaining material possessions in return for the banks’ forgiveness of his debt. Bankruptcy filings under Chapter 13 force people to repay debts over time in accordance with a court-approved plan.

Currently, a bankruptcy judge decides whether someone qualifies for dissolution of debts under Chapter 7 or under a repayment schedule agreed to by the judge, the creditors and the debtor.

The proposed legislation would create a new standard in which, if a debtor has sufficient income to repay at least 25 percent of the debt over five years or earns at least the median income for his state, he or she is automatically forced into a Chapter 13 debt repayment plan. In California the per capita income is about $22,785, the median household income is about $46,802, and the median income for a four-person household is $63,206.

The House vote had approved this change, but a compromise had to be negotiated with the Senate on a previously passed Senate version. After a compromise had been reached, the new bill was submitted to the House for another vote.

Several Republican members of the House of Representatives voted against the compromise because it did not protect abortion clinic bombers.

I am not kidding.

Senate Democrats had inserted a provision in the Senate version of the bill to prevent abortion clinic protestors from using bankruptcy to avoid paying court fines for damage caused by their protest action. House Republicans wanted to eliminate that provision. The compromise would have prevented those who intentionally violated the law from seeking protection in bankruptcy.

This was not good enough for the anti-abortionist Republicans. They wanted complete protection and insisted that the “intent” provision be removed. So, even though the rest of the House and the Senate were willing to give these protestors some protection, the dogmatic Republicans voted against the compromise and it was defeated.

After this vote, the House began its summer vacation. The Senate leaves this week. With Congress out of session for the next several weeks, there is still time to file under the existing law. When they get back, this will be one of the first things they will look at.