Ten Things I’d Change About BAPCPA-Part Three

27 Oct Ten Things I’d Change About BAPCPA-Part Three

In this series, I’m considering the possibility of changes to BAPCPA, to eliminate some of the the worst of its anti-consumer provisions, and promote efficiency and economy in both the court and practice. The third change I would make to the provisions of BAPCPA would be to include Social Security equivalents and child support to the types of income excluded from the means test.

In Part One I suggested removing the requirement for credit counseling when a foreclosure is pending, to prevent needless impediments to those trying to save their homes.  In Part Two I argued for changing the way applicable exemtion schemes are determined.  Third on my list is a change that would treat income from retirement schemes and disability schemes that are not funded by Social Security the same as such payments that are based on the Social Security act.  Thanks again to Wendell Sherk, whose idea this was.

Most states have retirement plans that take the place of Social Security.  If you qualify for that scheme, you make contributions to that plan instead of Social Security; when you retire or become disabled, you draw from that plan instead of from Social Security.  Another example of such a scheme is railroad retirement; there are others, as well. Yet, for purposes of the means test in bankruptcy, which can determine whether you qualify for Chapter 7, or how long your Chapter 13 plan must last, Social Security income is not counted, but other sources of retirement or disability income are included.  It is a simple matter of fairness to treat similar sources of income alike, so that people whose situations are alike have the same options in bankruptcy.

In addition to those items which are actually equivalent to Social Security, I would also exclude child support from the income that is used to calculate the means test.  The reasoning here is different, and partly, I must admit, intuitive.  It simply offends me that money that is intended to take care of a child is used to calculate how much gets paid to the parent’s creditors.  In part my opinion is informed by the (admittedly) anecdotal evidence I have seen in my practice of how woefully inadequate most child support payments are to actually care for a child.  And finally, I am greatly concerned that on those (again, admittedly) rare occasions where a lump sum of child support is finally collected, that payment might be the reason that the recipient does not qualify for Chapter 7 relief, or must fund a 60 month Chapter 13 plan instead of a shorter plan.  In any case, it will cost the recipient time, aggravation, and increased attorney fees to deal with such an eventuality.  It should never even enter the equation.

Adding such exclusions from income counted towards the means test would be a simple and effective way of ensuring the fairness of the bankruptcy laws to debtors who are similarly situated, and those who are attempting to do what we all want to do-take care of our families.

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