You’ve heard the rhetoric.
Now hear the facts.

Bankruptcy reform legislation was crafted to ensure that the safety net of bankruptcy relief is there for families who need it, while requiring repayment from the wealthiest of debtors who can clearly afford it.

A few weeks ago, Time Magazine published an article about pending bankruptcy reform legislation. The sheer number of errors in this piece brings serious question to the article’s credibility.

One of the article’s most egregious errors was the use of case studies highlighting families facing extraordinarily difficult financial circumstances. While these cases were tragic, the legislation would not adversely affect them.

The Trapp family, prominently featured in the article, is a good example of how reform will protect families facing similar challenges. After a review of the Trapp family’s situation, it becomes clear that they do not have enough income to support even the most basic of monthly expenses. As a result, the Trapps would be exempted from any effort by the U.S. Trustee to move the family into a Chapter 13 repayment plan.

Senator Wellstone made a similar error in a press conference earlier today when he introduced Patricia Blake — a single mother with two dependent children from Philadelphia who filed for Chapter 7 bankruptcy last year — as an example of someone who would be adversely affected by bankruptcy reform legislation. Ms. Blake mistakenly noted in her comments that her allowable monthly expenses under bankruptcy reform would be capped at $850. It seems Ms. Blake has received inaccurate information on the bill, for under bankruptcy reform legislation, her monthly expenses would actually be $3,965.85 — higher than even Ms. Blake herself indicated when she filed for bankruptcy last year. Once again, Chapter 7 bankruptcy would continue to be available to Ms. Blake — and other families like her — just as it is today.

The following pages provide an analysis of these case studies and others — most of which were originally spotlighted in the Time article — followed by an explanation of how bankruptcy reform reasonably determines a debtor’s ability to pay. These documents illustrate how bankruptcy reform will ensure that those who can pay will do so while protecting families like the Trapps — who clearly need access to this vital lifeline.

 

National Consumer Bankruptcy Coalition

 

 

Contact: Trish Wexler (202) 585-2035




Bankruptcy Reform Legislation:    
Protecting Those Who Need it Most    
                                     
  Charles W. & Lisa Ann Trapp   Patricia Blake   Maxean Bowen   Lucy Garcia   Eva Rowlings   Allen & Carolyn Smith   Marilynn Curry Martha Pouliot   Case of abuse recently highlighted in Washington Post+    
  Case No. 00-21448-H   Case No. 99-11593   Case No. 00-11854   Case No. 00-11202   Case No. 99-09499   Case No. 98-01200 - PJW   Case No. 99-81031F Case No. 00-41598   Case No. 97-337761    
Gross Monthly Income $4,800   $3,717   $2,500   $2,993   $1,766   $1,473   $1,762 $2,834   $14,992    
Monthly Expenses* $5,188 ** $3,966   $3,119 ** $3,128   $1,706 ** $2,203 ** $2,949 $2,737   $13,539    
Available to Repay Unsecured Creditors ($388)   ($249)   ($619)   ($135)   $60   ($730)   ($1,187) $97   $1,453    
Five-year Repayment Capacity NONE   NONE   NONE   NONE   $3,574   NONE   NONE $5,820   $87,171    
IMPACTED BY BANKRUPTCY REFORM? NO   NO   NO   NO   NO *** NO   NO NO *** YES    
                                     
* Expenses as determined through model in bankruptcy reform, including food, apparel, dry cleaning, housekeeping supplies, personal care products and services, actual mortgage payment or rent, homeowners or renters insurance, home repairs and maintenance,    
** Expenses determined by bankruptcy reform are actually more generous than expenses listed by debtor on bankrupty petition.    
*** Retain the right to receive the full relief under Chapter 7 bankruptcy because a.) income is below median income level, and b.) repayment capacity is less than the "threshold" of the lower of (i) $10,000 or (ii) the greater of $6,000 or 25% of unsecur    
+ Petition and analysis can be obtained by calling Trish Wexler, (202) 585-2035    
Source: Data taken from actual bankruptcy petitions, and by using calculations in bankruptcy reform legislation