When Congress changed the bankruptcy code in 2005, they didn't take into account what it would do to the American family.
With the addition of the means test many families don't qualify under combined household incomes, but if they get divorced the couples, now being individuals, qualify being under the median income.
Basically, the passing of the BAPCPA in 2005 and encourages the breakup of American families who are having financial difficulties.
It's hard enough to keep a marriage together without the pressures of creditors breathing down your neck.
To get out from under the financial pressure using bankruptcy the couples who make over the median might just decide to get divorced along with filing for bankruptcy.
The Bankruptcy Appellate Court has reached this same conclusion and believes it should be revisited by Congress to make changes necessary to eliminate the marriage punishment that is happening currently when couples file bankruptcy.
In the case the court heard, the couple that was separated, deciding on whether or not divorce was an option, was maintaining two separate households.
Each household had separate income and expenses.
Under the bankruptcy means test, each separate household by themselves were below the median income.
According to the bankruptcy code because the couple was not divorced both incomes had to be counted whether they were filing on their own or filing bankruptcy jointly.
Calculating it this way put the debtors way over the median income forcing them to have to file Chapter 13 bankruptcy.
If not for the means test, individually they should be able to file Chapter 7 bankruptcy and qualify easily.
This in essence, punishes the married couple for trying to stay married.
Many couples in this situation decided it's best to just pull the plug and get the divorce so they can deal with their financial troubles also.
Forcing the couple into a Chapter 13 bankruptcy will create extreme financial distress, because the debtors will have to maintain a five year payment plan using the increased income.
This is basically creating the perfect storm to destroy the couple financially and most likely fail in the Chapter 13 bankruptcy.
If the bankruptcy law was changed to allow couples living separately to not include the spouse's income, hopefully it would help to keep more families together.
In this situation, the debtors would be able to file Chapter 7 bankruptcy separately to get out from under the pressure of the debt and possibly allow them to work on their marriage.
Worst case scenario would allow the debtors to file Chapter 13 bankruptcy under a shorter three year payment plan.
If Congress would look at the outcome of individual circumstances as the bankruptcy code stands they might find it in their hearts to revisit and change the bankruptcy law again.
With divorce and bankruptcy going hand-in-hand like peanut butter and jelly, it is time to take a look at the reasons why.
Filing for bankruptcy is no fun, but try adding the emotions that come with a divorce then you'll be crying uncle for any kind of relief.
With the addition of the means test many families don't qualify under combined household incomes, but if they get divorced the couples, now being individuals, qualify being under the median income.
Basically, the passing of the BAPCPA in 2005 and encourages the breakup of American families who are having financial difficulties.
It's hard enough to keep a marriage together without the pressures of creditors breathing down your neck.
To get out from under the financial pressure using bankruptcy the couples who make over the median might just decide to get divorced along with filing for bankruptcy.
The Bankruptcy Appellate Court has reached this same conclusion and believes it should be revisited by Congress to make changes necessary to eliminate the marriage punishment that is happening currently when couples file bankruptcy.
In the case the court heard, the couple that was separated, deciding on whether or not divorce was an option, was maintaining two separate households.
Each household had separate income and expenses.
Under the bankruptcy means test, each separate household by themselves were below the median income.
According to the bankruptcy code because the couple was not divorced both incomes had to be counted whether they were filing on their own or filing bankruptcy jointly.
Calculating it this way put the debtors way over the median income forcing them to have to file Chapter 13 bankruptcy.
If not for the means test, individually they should be able to file Chapter 7 bankruptcy and qualify easily.
This in essence, punishes the married couple for trying to stay married.
Many couples in this situation decided it's best to just pull the plug and get the divorce so they can deal with their financial troubles also.
Forcing the couple into a Chapter 13 bankruptcy will create extreme financial distress, because the debtors will have to maintain a five year payment plan using the increased income.
This is basically creating the perfect storm to destroy the couple financially and most likely fail in the Chapter 13 bankruptcy.
If the bankruptcy law was changed to allow couples living separately to not include the spouse's income, hopefully it would help to keep more families together.
In this situation, the debtors would be able to file Chapter 7 bankruptcy separately to get out from under the pressure of the debt and possibly allow them to work on their marriage.
Worst case scenario would allow the debtors to file Chapter 13 bankruptcy under a shorter three year payment plan.
If Congress would look at the outcome of individual circumstances as the bankruptcy code stands they might find it in their hearts to revisit and change the bankruptcy law again.
With divorce and bankruptcy going hand-in-hand like peanut butter and jelly, it is time to take a look at the reasons why.
Filing for bankruptcy is no fun, but try adding the emotions that come with a divorce then you'll be crying uncle for any kind of relief.
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