President Bush at the bankruptcy bill signing ceremony:
Under the new law, Americans who have the ability to pay will be required to pay back at least a portion of their debts. Those who fall behind their state’s median income will not be required to pay back their debts.
The President’s comment is simply not true. Let me count just some of the ways:
1) Under current law, everyone pays back taxes, child support, alimony and student loans, and if they want to keep the house or the car, they have to pay those loans too. This bill expands the list of non-dischargeable debts for EVERYONE, regardless of income, and it expands the amounts that they have to pay for cars and other assets. To say that people leave bankruptcy and “don’t have to pay back their debts” is just plain wrong.
2) The means test will require EVERYONE who files bankruptcy — regardless of income — to file new forms, detailed budgets, tax returns and new affidavits. If the person cannot afford the higher lawyers’ fees to manage this new work or if the person trips over one of the requirements, then she is tossed out of bankruptcy — regardless of whether she is above or below median income. In some places, the means test bites above-median and below-median debtors differently, but it bites everyone.
3) The dozens and dozens of other provisions in the bill that are aimed at consumers have no income test. They apply to everyone, regardless of income.
4) The millionaires’ loopholes remain open. To say that those with above-median income will pay something is true only for the common folk. The millionaires can still slide through. This bill has always suffered from a truth-in-advertising problem. The proponents say the bill does one thing, while the reality is very different. Evidently that problem persists even as the President describes what he is signing.