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Under the legislation before Congress, new means tests would force more borrowers into Chapter 13--leading to still more failures--and would eliminate bankruptcy as an option for others. For this second group, life will be especially bleak. Listen to their future as described by Brady Williamson, who teaches constitutional law at the University of Wisconsin in Madison and was chairman of the former National Bankruptcy Review Commission, appointed by Congress in 1995: "A family without access to the bankruptcy system is subject to garnishment proceedings, to multiple collection actions, to repossession of personal property and to mortgage foreclosure. There...
Other Visa- and MasterCard-financed studies asserted that many whose debts are discharged in bankruptcy could actually pay some of their bills but don't. The Credit Research Center at Georgetown University estimated that 25% of the debtors who file in Chapter 7 could repay more than 30% of their nonhousing debt over five years. The study warned that the continuing rise in bankruptcy filings would increase the cost of credit. It concluded: "Our results imply that the bankruptcy system itself is contributing to these rising costs by offering the opportunity to wipe out debt with a single signature...
...study of 1,955 Chapter 7 bankruptcy filers in 1997-98 by the Executive Office for U.S. Trustees, which monitors the bankruptcy system, concluded that "by the time they filed, they had little if any capacity to repay. In fact, most will have to increase income or reduce expenses to remain solvent after bankruptcy...
...same study projected that the total amount that unsecured creditors, like credit-card companies, might be expected to collect from all Chapter 7 filers added up to "less than $1 billion annually...
...study by two law professors at Creighton University, funded by the nonpartisan American Bankruptcy Institute, found that only 3.6% of Chapter 7 debtors would be able to pay more. "The vast majority belong in that chapter," the study stressed. "They have too little income after necessary expenses to repay unsecured debt. It is vital, therefore, that no undue burdens be thrust on that needy majority in order to flush out a small minority of abusers." The amount that might be collected: less than $1 billion...