Good intentions and a good education are apparently not enough for Upsolve to get the means test right.
Upsolve describes itself as a non-profit, created by Harvard Law School graduates, whose mission is to “help low-income Americans in financial distress get a fresh start through Chapter 7 bankruptcy at no cost.”
Admirable, so far.
Until you read this drivel about the means test.
When Congress changed the bankruptcy laws in 2005, income requirements were added to prevent bankruptcy abuse. You can file under Chapter 7, but if your income exceeds a certain amount in California, you are not eligible for a bankruptcy discharge.
Poppycock. A good bankruptcy lawyer could tell you so in a heartbeat.
And yet, someone with a heart beat wrote this promo for a piece of software. (“Software” wasn’t my first choice of words, here.)
Sadly, the public will be mislead to their detriment.
Means test misrepresented
The means test is a formula, not a table of income. Even families with generous gross incomes pass the means test if their allowable expenses and the composition of their debt consumes that income.
Whether you are above or below the median income is just the first sort. Above median, you have to supply further information about your actual expenses for things beyond food, housing and transportation.It’s your net income, according to the means test formula, that decides whether you are eligible for Chapter 7.
So, Upsolve’s statement that with a high income you can’t get a bankruptcy discharge is simply flat wrong. And what’s the point of telling the public “you can file, but you can’t get a discharge”?
I have other bones to pick with Upsolve’s presentation about bankruptcy options and choice of chapter. I’ve written about my take on those issues here and at Bankruptcy In Brief.
For starters, the discussion of the choice between Chapter 7 and Chapter 13 is shallow. But hey, these people are peddling Chapter 7, so why muddy the waters with complexity.
Wrong remedy for real problem
Upsolve does address a genuine and serious aspect of bankruptcy law since “reform” in 2005. Bankruptcy law today is unnecessarily complex.
BAPCPA, touted as “abuse prevention”, succeeded only in making bankruptcy for most consumers more complex and much more expensive. While those with business debt or unpaid taxes got a pass.
The consequences of errors in bankruptcy became more onerous.
Yet there is no evidence that “reform” (or “deform” as I liken it) lead to better outcomes for our economy as a whole. The means test itself was predicated on a fabrication that high income individuals were abusing bankruptcy.
Pre-deform, I occasionally recommended to clients that they forgo a lawyer and file their case themselves. No longer; it’s not safe.
But until the law is simplified, to suggest to average folks that a software program can guide them through the bankruptcy thicket is itself dangerous.
What recourse will bankruptcy filers have when the program oversimplifies, or the vocabulary or legal constructs is just beyond their understanding?
Let’s tackle the problems in the law such that it’s safe and inexpensive for families to file for bankruptcy the way they file their taxes.
