In recent articles the media has reported the passage of a new bankruptcy reform law. The attitude characterized behind the new law quoting an AP piece: "Its backers in Congress and the financial services industry insist that bankruptcy frequently is the last refuge of gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires — often celebrities — who buy mansions in states with liberal homestead exemptions to shelter assets from creditors."

The essential elements of the law quoting an AP piece: "Those with insufficient assets or income could still file a Chapter 7 bankruptcy, which, if approved by a judge, erases debts entirely after certain assets are forfeited. Those with income above the state's median income who can pay at least $6,000 over five years — $100 a month — would be forced into Chapter 13, where a judge would then order a repayment plan. The legislation also would require people in bankruptcy to pay for credit counseling."

Most people can agree with the notion that if you have the ability to pay off or partially pay down a debt one should do so. We can understand the concern of Credit Card companies since many times they are unintentionally caught in the middle financing the debacle. The attitude justifying the new law is one of gross over simplification as to the reason why people end up in debt they can not repay. The major reasons why people end up in debt and filing bankruptcy is not of irresponsibility but of circumstances beyond their means to control. Apparently, ignoring the structural reasons why the of the vast majority of Americans who are in trouble with debt, politicians once again focus on the stereotypes of abusive debtors who use the Bankruptcy system as a means to live a lifestyle at others expense. Why wasn’t the law more tailored to the abuses instead crushing the poor and unfortunate? Because it won’t get votes to do so, pandering to stereotypes does.

Had the politicians focused on the structural reasons of debt they would have taken action to deal with bulk of that debt. The first and foremost issue should have been addressing the issue of catastrophic medical indebtedness. Most of these people were without medical insurance, and therefore the hospitals and doctors charge these people, the ones who can least afford it, two to three times the amount the insurance companies are willing to pay for the same procedures and prescriptions and that is on top of fraudulent billing. If politicians were really concerned about people and not the publicity they got out of pandering to stereotypes, they would make it illegal to charge different rates to different people, in what I would call economic discrimination against the poor.

The second largest area of debt is that due to divorce, i.e. the so called Family Law system’s gross mismanagement of the divorce and child custody process. Again, dealing with the structure of the indebtedness problem we find two areas: Litigation costs for divorce can exceed $50,000 per person in a contested divorce. Judges usually will cut off charges exceeding that amount but not always. Mediation even though mandated by most state divorce rules, is non binding as to the cooperation from both parties. The attitude fostered by lawyers, especially those representing women, is that they will get a better deal from the judge than from mediation. In general, the judge’s willingness to pander to the stereotype claims of victimization from women, is a clear signal to divorce lawyers to urge their clients not to mediate in a meaningful way. Judges need to instruct both parties that under the law, each is entitled to certain treatment and responsibilities. Judges normally excuse themselves from this approach by insisting that it is legal counsel’s responsibility as officers of the Court to do so, however, that does not usually happen. The reason it is not happening is the vested interest of lawyers in hourly billing, the more litigation, the more billable hours. Structural reform should include flat fee based billing for divorce and child support. Take away the incentive to run up the bill and thereby increase the incentive to mediate.

Please note that contrary to the remarks made by law makers and supporters of the new law, child support is not dischargeable in bankruptcy. Once again, pandering to the stereotype. The reality is that child support payments do not reflect in any way the actual needs of the child or the living conditions of the non-custodial parent. The judges blindly follow the fixed percentage child support guidelines which gouge the non custodial parent for 25%+ of their gross income. Pandering to stereotypes about men, the judges don’t even bother to be concerned if the support payments can even be paid much less the child’s actual needs. It is not until a father working at minimum wage is dead broke being forced to choose between food and a roof over their head or paying the excessive child support payments will basically tell the court "put me in jail at least I have food and a place to live" at that a judge will relent to reduce or end the forced payments to a sustainable level. Even in jail with no means to pay, the support obligation continues to accumulate. Thus the amount of child support arrearages is has exceeded 90 "billion" owed to 20 million children. Moneys in most cases that is not collectable.

Those who are better off financially in the middle class income find themselves supporting two households with only enough finances for one. The father in most cases is forced into debt knowing the consequences of jail await him for non payment. The result is attempting to survive on credit card debt until the child support payments end at the child’s 18th birthday and as we see, sometimes they don’t make it. The failure of the Courts to properly manage child support and reasonably consider the true economic impact on the non-custodial parent reflects the Court’s stereotype of punishing the father for leaving the family, when in reality it was the Court who forced that departure through it’s discriminatory practices of insisting on physical custody for only one parent. Legal reform is necessary to end mismanagement and discriminatory practices of the so called Family Law system.

As a side note to bankruptcy, if you think it is bad being on the receiving end of bill collectors, just imagine what it is like to be an indigent father when the State is knocking at the door.

Several of the measures enacted gave child support agencies the powers to:

Obtain information through administrative subpoena

To suspend professional, occupational and drivers licenses

To suspend hunting and fishing licenses

To suspend motor vehicle registrations

To intercept bank accounts and stock funds with administrative liens and levies

To intercept both federal and state tax refunds, as well as lottery prizes

To implement immediate income withholding orders for support payments from wages paid by employers.

To require all employers to report every employee hired to a state directory of new hires.

Quotations from: Bankruptcy Law to Produce Rush of Filings, By MARCY GORDON, AP Business Writer