Creditors and Detors

Bankruptcy law, or at least some variation thereof has existed as far back as ancient Mesopotamia. Although much more advance the propose of the United States bankruptcy system is the same as it was in ancient times, to resolve the effects of financial crisis (cite source). Properly referred to as the Bankruptcy Code, United States’ bankruptcy system today provides both rights to creditors when seeking repayment of debt and remedies to debtors seeking relief from debt.

While providing both rights to creditors and debtors, the Bankruptcy Code attempts to achieve a proper and fair balance between the two parties interest. However, the continually changing economic and social environment makes achieving a fair balance difficult (cite source).

Today’s current bankruptcy laws favors the rights of creditors in the collection of debt over the remedies available to debtors seeking relief from debt. However this has not always been the case, in 2005 widespread changes in consumer bankruptcy law took effect with passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. With this new act it became more difficult for debtors to file for bankruptcy under Chapter 7 having to now meet certain eligibility requirements under a means test (cite source). The means test now requires those debtors wishing to file Chapter 7 Bankruptcy to have a monthly income less than the median income of the debtor’s state and for those debtors who’s income is above the state’s median income to be unable to pay $100 per-month toward paying off their debt. If the debtor is unable to meet the requirements of the means test then they must file under Chapter 13.

Fewer debtors being able to file under Chapter 7 and having to file under Chapter 13 gives creditors the upper hand. Chapter 7 allows for the liquidation and sale of the debtors assets minus those exempted by the debtors state with the precedes going to pay off debt (cite source). Not always is the monetary sum of the...