Social Justice through a Bankruptcy Prism: Welcoming "Social Justice" to the Blogosphere
Welcome to "Social Justice," an upstart blog that focuses on "poverty and social stratification in America." What separates this blog from many other "bleeding-heart" blogs is that this one is written from the unique perspective of a bankruptcy lawyer, who not only daily witnesses the underbelly of the consumer bankruptcy beast, but has a big heart too.
Here, the blog's big picture focus is on "help[ing] poor workers survive and potentially rise from poverty." He does so by focusing on things that are not "adding risk and expense, but reducing fixed costs, reducing the risk of unexpected costs, and promoting the mentality and logistics for fiscal responsibility."
Judge Easterbrook of the 7th Circuit recently reminded us that "the devil is in the details" (pdf). Yesterday's post from the Social Justice blog gets into the devilish details by focusing on a basic staple of life -- a car -- and on how changes in the bankruptcy law occasioned by BAPCPA's anti-consumer protection features have caused disproportionate disadvantages to the bankruptcy consumer. Of these unfair burdens, he writes:
Say an individual owns a car worth $5,000 (book value) but owes $8,000 to the car lender. Normally, that $8,000 is an under-secured claim, but nonetheless secured by the car. Under the old law (pre-October 17, 2005), that person could file for bankruptcy under chapter 13 and alter the nature of the debt. The chapter 13 would allow the person to owe only the value of the car ($5,000) as a secured debt and render the remaining debt ($3,000 here) unsecured. The effect was that the person still had to pay the $5,000 or lose the car, but paid only a portion of the $3,000—in the same way that the person would pay a portion of his credit card debt. If the person had a 10% distribution in bankruptcy he paid $300 so the car debt drops from $8,000 to $5,300.
No longer can the over-secured portion of the car debt be "stripped" from the total. Car lenders evidently thought this would help them get more money for those cars. I join others in believing the end result is more likely a decrease in chapter 13 filings for debtors in such a situation, and many of the cars simply being surrendered (returned in satisfaction of the remaining debt) by those who still choose to file.
This blog's focus on social justice from -- among other perspectives -- the perspective of consumer bankruptcy's new "kafkaesque" world will surely prove enlightening. Good luck and welcome!