Just being a consumer is enough to put you on Congress’s bad side when it comes to bankruptcy.
How do I know?
I read the “reformed” bankruptcy code.
Only those individuals whose debts are primarily consumer debts have to prove that they aren’t abusing the bankruptcy laws.
The Bankruptcy Code attempts to exclude from its shelter those who “abuse” the system. Abuse is equated with having “enough” money to pay your debts.
That’s “enough” money under the formula Congress wrote.
Only consumers are scrutinized
Only a debtor whose debts are “primarily consumer” debts is subject to this scrutiny. Others get a pass.
Those whose debts result from business failure or failure to pay their taxes are not subject to review for “abuse”, regardless of their ability to pay.
Those debts aren’t “consumer” debts for this purpose.
One’s ability to pay back some or all of business debts or, for Pete’s sake, pay your taxes, isn’t a gating factor for getting into bankruptcy.
Income no bar for failed business folks
The impact of the consumer/non consumer distinction came home to me as I interviewed a single man with a fine salary, yesterday.
He is exempt from the means test because his debt was incurred in business.
There is certainly a policy argument for making the consequences of business failure tolerable. That is, I think, a hallmark of the American business ethic, the acceptance of failure and the encouragement of trying again.
Now employed by others and enjoying a generous income, he doesn’t have to prove that he needs bankruptcy relief.
Free pass for unpaid taxes
The exclusion from the “can-pay” scrutiny for those who haven’t paid taxes seems to me to be harder to justify.
Our society isn’t stronger for a policy protecting those who haven’t paid their fair share of maintaining our infrastructure. Why do we let someone who has, for whatever reason, shirked paying taxes waltz into bankruptcy without scrutiny, where the guy with medical bills or credit card debt has to justify his need for bankruptcy?
Which leads you back to the unstated premise underlying the means test: consumers who can’t pay their bills are to some degree dishonest.
My learned opinion is HOGWASH.