The last major reform to the bankruptcy code was in 2005. With Elizabeth Warren now in the political limelight, she is calling for radical bankruptcy laws changes. Will the bankruptcy law change soon? A look into the history of the 2005 law change and Elizabeth Warren’s proposal may shed some light on whether a Bankruptcy law change is truly coming.
The 2005 Law Change Left a Sour Taste
Elizabeth Warren aggressively fought against the 2005 law change. She understood that it would greatly restrict bankruptcy access. As a law professor and legal researcher, she understood clearly that this would create problems for society. Warren was largely overcome in her clear opposition. After some argument, the law was passed with little changes, coming into effect in October of 2005.
Warren’s Bankruptcy Proposals “Right the Wrongs”
Warren is now committed to being a champion for bankruptcy and debtor rights. She strongly believes that a liberal and open bankruptcy system is required for preserving a free and profitable society. She has proposed several changes to the existing law.
One of the most needed changes she proposes is arguably a liberal, uniform federal homestead exemption. This would set a fair amount that every bankruptcy filer can use to protect their home from creditors. Currently, this system is virtually different in every state. Some states offer high exemptions that are almost unlimited. Other states only allow exemptions as low as $15,000 or even less. The current system is not uniform and unfair in some states. Warren proposes that fair and liberal exemptions for homes and all other property are uniformly provided.
Another powerful change would be the ease of access to bankruptcy. Warren proposes a uniform system that would offer complete relief for the debtor in a merging of the Chapter 7 and Chapter 13 system. All the bankruptcy forms would be simplified and provide easy access online. Then, debtors could either discharge some or all of their debts, or they could elect to pay some of the debts back. This would all be achieved through a simplified, single system. The fees for bankruptcy will be reduced also because of the system’s simplification.
Warren also proposes that debtors could pay their attorney fees after the bankruptcy case is filed. Currently, any work done by an attorney before a Chapter 7 bankruptcy case is filed must be paid for by some party BEFORE the case is filed. Also, the $335 court cost must be paid beforehand. Warren desires to eliminate these requirements by allowing the court and the attorney to be paid through the bankruptcy system at a later date. She argues that this will further increase the ease of access.
Time will tell if Warren will be successful in her goal for a bankruptcy system overhaul. The election may allow a show-casing of the need for this law change. It may actually become a topic of debate in the election.
The “Trojan Horse” 2005 Bankruptcy Reform Act is Creating Election Controversy
The 2005 Bankruptcy Reform Act is creating some controversy in the upcoming election. A renewed feud over the validity of the act between democratic candidates Elizabeth Warren and Joe Biden appears to be building. Was the 2005 law change truly a Trojan Horse that only served the interests of the credit industry? Elizabeth Warren would likely agree and may use this premise to attack Joe’s Biden for supporting the act over 15 years ago.
The 2005 Bankruptcy Reform Act- Why A Trojan Horse?
Many people currently argue that the “reforms” that happened through the 2005 Bankruptcy Reform Act were actually terrible news for people in debt. All of the reforms appeared to only be in the credit industry’s favor. More debtors than ever were forced into Chapter 13 to pay back large amounts of their debt. Even Chapter 7 filing was made more difficult with more complex forms and a class requirement. Arguably, bankruptcy access in entirety was made much more difficult though the 2005 law change. No provisions of the code made bankruptcy in any way “easier.”
Joe Biden was among the democrats that supported the law change. This is part of why bankruptcy is becoming a point of argument in the election. Bi-partisan support for the law change occurred in 2005 with Elizabeth Warren as a leader of the opposition. The primary argument that democrats and republicans used for the law change was to create a law that was more “strict” on debtors. The goal was to make these debtors ultimately become more financially responsible. They also hoped to achieve more abundant lines of free credit.
Did anything good come from the 2005 Law Change?
Not really. Or at least that is the consensus of most parties who study the legislation. Unfortunately, none of the Act’s stated goals appear to have been achieved through the 2005 Bankruptcy law change. Credit clamped up after the 2008 collapse. People continue to get into debt irresponsibly in massive numbers. In fact, some argue that the law change emboldened creditors to further push the entire nation to credit levels, arguably causing the 2008 financial crisis itself.
Society does not appear to have benefited as a whole through the law change. It went as far as to even tamper with ancient concepts of debt forgiveness like allowing a debt release to be available every seven years. This tampering of age-old concepts should seem repulsive to most people, but for some reason passed through virtually unnoticed by Congress and society alike.
Perhaps the thin facade of the horse’s exterior was all the credit industry needed to get the law to pass. It will certainly be reviewed in greater detail if Elizabeth Warren continues her quest to expose and destroy it. Perhaps it will truly go down eventually as an obvious “Trojan Horse” piece of legislation. Hindsight is always 20/20. By the end of this, Joe Biden may not end up looking like a very observant legislator at the very least.
ITT Tech was once a well-respected technical training school that orignated in 1969. The headquaters was in Carmel, Indiana. By the 1980’s and 1990’s, ITT Technical Institute was synonomous with high-quality, no-nonsense education. Both young students right out of high school and older adult students would flock to ITT tech to learn the “skills of tomorrow” today (or at least according to it’s former exciting commericials).
Countless graduates of ITT Tech of older generations have successfully enjoyed entire careers based on their educational start at ITT Tech. The question immediately comes – what happened? How did this “for-profit” training school decline into a lawsuit-ridden mess that eventually closed all of its operations?
STUDENT LOAN COLLAPSE
ITT Tech found itself in the midst of the student loan system collapse. Many “for-profit” schools are now falling into this mess. Apparanetly, “for-profit” schools were once a feasible, even admirable pursuit. Then, student loan federal funding came. Once student loan and federal funding became the “norm,” many for-profit schools descended into a frenzy of bad business and recruitment activities. They had to deal with this new reality of “for-profit” schooling. It all became about student loan salesmanship.
How did the school decline? How did the school generate numerous worthless education programs that would never actually benefit the students? Part of this answer was marketing and salesmanship. The school was not marketing any more to student who would actually pay for their education. They instead marketed to students who did not understand the magnitude of student loans or federal aid that they were getting from the government. You get more creative (to say it nicely) in your marketing and program focus when you are selling something with “funny money” instead of cold, hard cash.
TIME IS SHORT: REMOVE STUDENT LOAN SPECIAL STATUS IN BANKRUPTCY
Many public schools have also followed suit. The damage to public higher educational institutions cannot be measured. Now is a crucial time because many public institutions have long followed the same road as the for-profit schools. Although many politicians are calling for elaborate fixes to the student loans system, the best option would be simple. The solution is to treat student loans the same as all other loans in bankruptcy. Currently student loans cannot be discharged in bankruptcy. Allowing student loans to be discharged in bankruptcy will “pull the plug” on the funny money of student loans. It will protect future generations from a bad educational system that saddles them with lifetime debt. It will also prevent a magnitude of previously respectable schools like ITT Tech from being brought into ruin.
As you may have heard, USA gymnastics has filed for Chapter 11 bankruptcy relief in the Indiana Southern District for bankruptcy. This filing which occurred in early December 2018 is certainly high-profile Indianapolis bankruptcy news. Recently a deadline of April 26, 2019 has been solidified so far for filing claims in the case.
USA Gymnastics: Why File Bankruptcy?
USA Gymnastics has filed for Chapter 11 relief in an attempt to properly address the large magnitude of the civil claims related to the victims of Dr. Larry Nasser. USA gymnastics filed in Indianapolis for relief under bankruptcy due to it being the proper geographical jurisdiction.
A large magnitude of the settlement money will likely be required to properly address the claims. The claims potentially far exceed the value of USA gymnastic’s total assets. Therefore, the entity opted for Chapter 11 protection, which will also cause additional third party and governmental oversight to be brought into this delicate situation.
What is the End-Game?
USA Gymnastics is likely hoping to reach a court-approved settlement of the claims through a plan of reorganization or other settlement method during the case. The settlement will likely ultimately include a contribution from USA Gymnastics’ insurance providers and possibly from the assets of the entity itself. Whatever the outcome, having the court supervision and open-style nature of a Chapter 11 could potentially afford a higher level of capacity for justice and full disclosure, at least from certain estimations. Even if the situation transitions into a total liquidation, the court will still provide a venue for allocation of funds to settle claims.
The Local Scoop
Respected local Judge Robin Lynn Moberly has been assigned to the bankruptcy case. The United States Trustee’s Office, a branch of the Department of Justice, will provide direct oversight in the situation. Media coverage has also been on the scene for the filings.
Since there are new tax laws, many people will find themselves receiving a smaller tax refund this year. Due to the new tax law change, people will receive an average of a 15% drop in their total tax refund. This may sound confusing because in actuality the total amount of tax that most people must pay is actually less.
You Pay Less But Get Less Back
How is this possible? How can you pay less but then somehow get less of a refund? The reason why is because the new tax laws have made over-withholding more difficult as you pay your taxes throughout the year. Essentially, you are getting to use more of your money throughout the year instead of receiving it all at one time in your tax refund. This can be a surprise to some who believed they were over-withholding the same as last year. They can be surprised when they receive a smaller tax refund.
New Tax Laws – Simplifying the System
One intent of the tax law change was to simplify the system. However, this simplification has also caused tax refunds on average to decrease. Certain provisions such as earned income credit and other required reporting on the forms are now designed also to not create excessive amounts for refunds. To further simplify, the government also wanted to put a stop to high over-withholding amounts. The simplification of the system has caused some people to not be eligible for certain provisions under the tax code that would have otherwise elevated their refund in the past.
What Does the Future Hold?
What does the future hold for high tax refunds? In all likelihood, tax refunds could very well even decrease further in the future as the government streamlines the tax system. With simplicity in the system, the government approach to completing tax forms and processing tax refunds would likely result in a more simple system all around. In such a modernized system, you would be forced to accurately pay your tax throughout the year. Then, basic returns may be simplified to the point in which they are nearly automated through an online, government interface. This system could take a huge burden off of what government funds are required to operate the IRS. However, it would likely further decrease the amount of the average tax refund.
