During the bankruptcy wars, advocates for the amendments promised that it wouldn’t hurt any families with incomes below the state median. But Senator Grassley and Senator Sessions are going back on those promises, quietly trying to pressure the committee that writes the bankruptcy forms to make families jump through needless—and dangerous—hoops.
The new law has many problems, but the one provision that was supposed to preserve some fairness said that anyone with an income below median is eligible for Chapter 7—period. When someone documents that his income is below-median, he can skip pages and pages of complicated expense calculations on the bankruptcy forms because they are irrelevant. Why make someone march up the hill, only to turn around and march back down again?
Senators Grassley and Sessions sent a letter to the committee that drafts these forms, insisting that the forms be changed to require every low-income debtor to provide detailed, useless information on every aspect of their budgets and produce all the supporting records. Why? Because this requirement would lay one more trap for people who don’t have a team of lawyers and accountants to help them go broke.
Squeezing poorer debtors out of the bankruptcy system would increase credit industry profits. Because creditors could continue to make collection calls and garnish wages and seize checking accounts at will—and there wouldn’t be any place for the families in trouble to turn. Sure, they may not pay much, but $20 one month and $50 the next for twenty years or so multiplied by a few million families can add up to real money.
If low-income families are automatically eligible for bankruptcy, how can they legally be squeezed out of the system? One way is to raise the fees for filing bankruptcy, which Congress has done. The other is to raise the costs by making the paperwork more complex. That way no one can do it without a lawyer and lawyers will have to charge more. And for those who stumble on the details of the expense records, there’s always the possibility of prosecution by the Department of Justice. With any luck, poorer debtors just can’t afford to go broke.
It seems that Senators Grassley and Sessions are still looking for ways to turn a promise of protection into one more trap for families already in deep financial trouble.
