Individual bankruptcy policies

From OpenCongress Wiki

Jump to: navigation, search

This article is part of the community project
Project:Asian American Public Policy
by students at the University of Maryland.

Articles are under construction until late May, so please refrain from editing until then.



Market bankruptcy.jpg


Contents

Overview

Definitions of Terms

  • Bankruptcy is a state of financial ruin that entitles creditors to have one's estate administered for their benefit.
  • Mortgage is a lien against property (as for securing a loan) that becomes void upon payment or performance according to stipulated terms.
  • Foreclosure is a legal proceeding initiated by a creditor to repossess the collateral for loan that is in default.
  • Recession is a period of reduced economic activity and economic contraction.
  • Credit refers to confidence in a purchaser's ability and intention to pay, displayed by entrusting the buyer with goods or services without immediate payment.  It is a reputation of solvency and probity, entitling a person to be trusted in buying or borrowing.[1]

Bankruptcy Statistics

Graph.jpg


Additional Bankruptcy Statistics


  • 78 Percent:  Rise in first quarter bankruptcy filings from an year earlier, by large corporations liquidating or reorganizing in Chapter 11, nearly tripled from 2007 as the U.S. reached 15th month of a recession.
  • $101 Billion:  Combined debt of public companies filing for bankruptcy through March 31, according to Bankruptcydata.com.
  • 663,000: Number of Americans who lost their jobs in March, resulting in a increase in the jobless rate to 8.5 percent.  The significant increase in bankruptcy filings comes as unemployment in March reached to the highest level since 1983.
  • 1.1 million: Number of Americans who filed for bankruptcy in 2008, 32 percent more than the 827,000 filed in 2007 and 86 percent higher than the 590,500 filings in 2006.
  • 323,500:  Number of bankruptcy filings so far in 2009.
  • 630,000: Number of Americans who sought bankruptcy protection in the two weeks before revisions to federal bankruptcy laws in October which ultimately made it more difficult for individuals to erase debts.  Bankruptcy filings still remain behind the all-time record of 2.1 million set in 2005.  [2]

Current federal laws and regulations

Bankruptcy1.jpg
Chapter 7 of the Title 11 of the United States Code (Bankruptcy Code) governs the process of liquidation under the bankruptcy laws of the United States. (In contrast, Chapters 11 and 13 govern the process of reorganization of a debtor in bankruptcy). Chapter 7 is the most common form of bankruptcy in the United States [3]


Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most prominently used by corporate entities. In contrast, Chapter 7 governs the process of a liquidation bankruptcy without the repayment of liabilities, while Chapter 13 provides a reorganization process for the majority of private individuals, including a repayment plan for a portion of liabilities. [4]


Chapter 13 bankruptcy filing is a way for individuals in the United States to undergo a financial reorganization supervised by a federal bankruptcy court. The Bankruptcy Code anticipates the goal of Chapter 13 as enabling income-receiving debtors a debtor rehabilitation provided they fulfill a court-approved plan. Compare the goal of Chapter 13 as a debt reduction mechanism with the relief contemplated in Chapter 7 which offers immediate, complete relief of many oppressive debt(s).[5]


Recent legislation

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)


This was a law enacting several significant and controversial changes to the U.S. Bankruptcy Code. It was passed by the 109th United States Congress on April 14, 2005 and signed into law by President George W. Bush on April 20, 2005. Most of the provisions of the act apply to cases filed on or after October 17, 2005. Colloquially referred to as the "New Bankruptcy Law", the Act of Congress attempts to make it more difficult for some consumers to file bankruptcy under Chapter 7; these consumers may instead utilize Chapter 13. [6]


Provisions


The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made large changes to American bankruptcy laws, affecting many groups, including bankruptcies filed by both consumers and business entities. Some of the bill's provisions were explicitly designed by the bill's Congressional sponsors to make it "more difficult for people to file for bankruptcy." The BAPCPA was intended to make it more difficult for debtors to file a Chapter 7 Bankruptcy--under which most debts are forgiven (or discharged)--and instead force debtors to file a Chapter 13 Bankruptcy--under which debts are discharged only after the debtor has repaid some portion of these debts. However, approximately 85% of debtors are not placed under the subject of the "means test" and a large portion of the rest are able to pass the means test.


Means Test


The means test is intended to discriminate abusive debtors from non-abusive debtors.  Debtors whose monthly income is higher than the median income of their state are subject to being found abusive. Debtors whose income falls below the median income figure may be in violation of the means test, however no party is permitted to file a motion in order to find abuse. This creates a means test blanket for debtors deemed non-abusive - those below the state's median income figure.


Credit Counseling


Another major change to the law enacted by BAPCPA deals with eligibility requirements. Section 109(h) provides that a debtor will no longer be eligible to file under either chapter 7 or chapter 13 unless the debtor received an "individual or group briefing" from a nonprofit budget and credit counseling agency approved by the United States trustee or bankruptcy administrator within 180 days prior to filing.


Current Pending Legislation

H.R. 1106 - Helping Families Save Their Homes Act of 2009

The bill aims to create a mechanism by which Bankruptcy Court judges can impose a modification of a homeowner’s mortgage on their primary residence to help them avoid loss of their home [7]


The Helping Families Save Their Homes In Bankruptcy Act would allow a Bankruptcy Judge to confirm a Chapter 13 plan that reduced not only the Interest Rate but also the Principal Due (known as a Cram-down). In theory, a Homeowner who owed $225,000.00 on a home that had a market value of $200.000.00 and whose interest rate had adjusted to 12% could realize a principal and interest rate reduction that would reduce their monthly payment from $2348.99 to $1199.10.


To Qualify a Home Owner Must:


  1. File For Protection Under Chapter 13 of the Bankruptcy Code
  1. Have an Adjustable Rate Mortgage
  1. The Home at Issue must be the Homeowners Homestead
  1. The Term of the Mortgage must be no longer than 30 years

On March 5, the House voted to pass the bill, 234-191, with most Democrats supporting the bill and most Republicans opposing it.
However, this bill is still awaiting approval from the Senate in order to become law.


S. 896 - Helping Families Save Their Homes Act of 2009

The aim of this bill is to prevent mortgage foreclosures and enchance mortgage credit availability. 


This bill is very similar to the corresponding House Bill 1106, except for one major difference - the exclusion of "Cram-Down".  Cram-Down was attempted to be added as an amendment by Senator Dick Durbin (D-IL) on April 30, 2009 but was unsuccessful as the amendment was rejected by a count of 45-51.  [8]


A few major changes proposed by this bill include:


  • Amends the Federal Deposit Insurance Act (FDIA) and the Federal Credit Union Act (FCUA) to increase deposit insurance coverage permanently to $250,000
  • Extend to eight years the time period applicable to a Deposit Insurance Fund (DIF) restoration plan
  • Amends the National Housing Act with respect to insurance of home equity conversion mortgages for the elderly. Redefines a mortgage on the alternative kind of leasehold under such insurance program as one that has a term that ends no earlier than the minimum number of years, as specified by HUD, beyond the actuarial life expectancy of the mortgagor or co-mortgagor, whichever is the later date. (Currently, a lease having a period of not less than 10 years to run beyond the mortgage maturity date.)
  • Establishes in the Department of Justice the Nationwide Mortgage Fraud Task Force to address mortgage fraud in the United States

This bill passed in the Senate 91-5 with 3 abstaining but has not completed the legislative process to be enacted as law.


H.R. 200 - Helping Families Save Their Homes in Bankruptcy Act of 2009

This bill reduces the debt of homeowners filling for bankruptcy under Chapter 13 through various measures.  These measures include exclusion in the computation of debt of certain previously included components and the reduction of fees in the bankruptcy process. It also provides exceptions to the credit counseling originally mandatory for all those filling under Chapter 13 as well as other alternative easing measures.


This bill has not yet been voted on in the House.[9]


S. 61 - Helping Families Save Their Homes in Bankruptcy Act of 2009

This bill is intended to amend federal bankruptcy laws concerning Chapter 13 bankruptcy.  It is a cross-filing of H.R. 200.


This bill has not yet been voted on in the Senate.[10]


H.R.1301

To amend the Internal Revenue Code of 1986 to suspend the 180-day period for completion of a like-kind exchange in the case of the bankruptcy of a qualified intermediary or an exchange accommodation titleholder.  Amends Internal Revenue Code provisions allowing nonrecognition of gain from like-kind exchanges to suspend the 180-day period for completing such exchanges in cases involving exchange facilitators who have filed a bankruptcy petition.[11]


This bill has not yet been voted on by the House or the Senate.


How Asian Americans Are Affected

        The current economic crisis has been affecting all Americans. All across the nation, homes are being foreclosed on, loans are defaulting and dreams are crumbling. The American Dream of hope and prosperity and home ownership is collapsing. Some of the hardest hit are Asian Americans. The boroughs of Asian Americans in areas like New York City and Los Angeles are finding their dreams drifting away as their mortgages skyrocket and banks in on foreclosure [12]. The stereotype of Asian prosperity is becoming nothing but an echo of a fond memory. Asian Americans, especially in urban areas, are experiencing particularly difficult times. New York City has been one of the hardest hit areas.


        According to research conducted by two students of the Milano New School for Management and Urban Policy in Jackson Heights, South Asians made up the majority of homeowners facing new foreclosures in two Queens neighborhoods over the last six months and comprised a substantial percentage of those facing foreclosure in several others [13]. One half of homes facing foreclosure in South Ozone Park also belonged to South Asian families. Jackson Heights was another area with struggling Asian Americans with 46 percent of the homes facing foreclosure belonging to South Asian families, followed by Kew Gardens, Woodside, Jamaica, Queens, Richmond Hill, Briarwood and Elmhurst [14] CDC (Community Development Corporation) is a community oriented group based in Jackson Heights, Queens. CHHAYA just became a HUD-certified (U.S. Deptrment of Housing and Urban Development) counseling agency, joining 1,800 other groups throughout the country. It is the only group dedicated to the South Asian community, officials said. They studied the makeup and economic situation of the area to see just how the Asian American community has been affected by our economic downturn. They revealed that analysis showing South Asians as one of the largest affected communities in the entire nation [15]. Their headline: “Fifty percent of homes in pre-foreclosure are owned by South Asian immigrants in sections of New York City”. According to their findings, over 6,000 foreclosures were filed in Queens last year, making it the epicenter of the foreclosure crisis of New York City [16]. Among the boroughs in New York City with the highest concentration of foreclosures, all of them also had the highest concentration of Asian Americans living there (the southwestern and northwestern Queens neighborhoods)[17].


Fast(Not So Fun)Facts

Aast pic.jpg


  • Every 15 minutes in Los Angeles, a family loses their home due to foreclosure. One in every 440 U.S. homes received a foreclosure filing in February[18]
  • Foreclosure filings were reported on 290,631 properties in February, up almost 30% from February 2008 [19]
  • In California, a home is lost every two minutes.
  • The Economist reports that, based on the characteristics of the current financial crisis, the U.S. is in a depression, not a recession.
  • U.S. GDP in the fourth quarter last year fell an estimated six percent, but that number is expected to accelerate through 2009.
  • American homeowners have lost $2 trillion of equity (the worst housing slump since World War II).
  • The unemployment rate for construction workers in Florida, which was a booming industry only a few short years ago, has been estimated around 45%.
  • The overall unemployment rate currently stands at 7.2 percent, a 15-year high according to Bureau of Labor Statistics.
  • World output projected to decline by 1.3 percent in 2009.  [20]
  • The IMF said it expects world trade volumes to contract this year, falling by 2.8 percent. [21]

Articles and resources

See also


References

  1. http://www.merriam-webster.com
  2. http://www.bankruptcy-statistics.com/index.php?option=com_content&view=category&id=81&layout=blog&Itemid=198
  3. http://www.articlecat.com/Article/An-Overview-of-Chapter-7-Bankruptcy/213050
  4. http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html
  5. http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter13.html
  6. http://thomas.loc.gov/cgi-bin/query/z?c109:S.256.ENR:
  7. http://www.mortgagelawnetwork.com/helping-families-save-their-homes-in-bankruptcy-act-of-2009-fox-business-network-coverage/
  8. http://www.opencongress.org/bill/111-s896/show/
  9. http://www.opencongress.org/bill/111-h200/show/
  10. http://www.opencongress.org/bill/111-s61/show/
  11. http://www.opencongress.org/bill/111-h1301/show/
  12. http://www.realtytrac.com/foreclosure-laws/new-york-foreclosure-laws.asp<ref>
  13. http://www.newschool.edu/milano/Default.aspx
  14. http://www.yournabe.com/articles/2009/01/15/queens/doc496f718b0d74f557373906.txt<
  15. http://www.chhayacdc.org/pdf/CautionForeclosure_rescuescam_english.pdf
  16. http://www.chhayacdc.org/pdf/CautionForeclosure_rescuescam_english.pdf
  17. http://www.aafny.org/default.asp?hid=48
  18. http://www.keepmyhouse.com/2009/03/12/foreclosure-statistics-for-february-2009/#high_3<
  19. http://www.keepmyhouse.com/2009/03/12/foreclosure-statistics-for-february-2009/#high_3
  20. http://www.imf.org/external/pubs/ft/survey/so/2009/RES042209A.htm
  21. http://www.imf.org/external/pubs/ft/survey/so/2009/NUM012809A.htm


External resources

  • Chhaya CDC
  • U.S. Department of Housing and Urban Development
  • Milano The New School for Mangament and Urban Policy
  • The Economist
  • National Association of Consumer Bankruptcy Attorneys

dan scarfo

new york accident lawyer

nj seo




External articles

  • Barack Obama's Plan to Reclaim the American Dream for Asian American and Pacific Islander Families
  • Foreclosures hit Queens’ South Asian community
Toolbox