In eastern philosophies, the “Yin” and “Yang” is a concept used to describe how opposing forces are connected and dependent on each other in the natural world.

Light and dark, male and female and hot and cold are some examples of “yin yang” duality.

While opposites, the yin yang concept shows us the balance of all things around us.  Essentially, in the natural world, these opposing forces balance each other out.

The concept of balance is central to many eastern philosophies and religions and is key to happiness, healthiness and functionality.

Our society uses the symbol of a scale to define justice, evidencing the importance we place on balance in our legal system.

Unfortunately, in 2005 the attempt to balance that scale may have caused it to tip too far and break.

Unbalanced Bankruptcy

In 2005, Congress passed into law the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).  The name of this new law would indicate the intention to create a balance between abuse of the bankruptcy process and protection of consumers.

It is debatable whether BAPCPA does in fact prevent “bankruptcy abuse” but I feel comfortable saying that it does nothing to protect consumers.

In fact, I would argue that BAPCPA hurts consumers by creating obstacles to entry that are sometimes insurmountable.

The demographic of the bankruptcy filer seems to be shifting and I am seeing more people with no viable options in bankruptcy.

There is simply no yin yang to the means test.  The balance is off.

Tipped Scales

I am currently helping two completely different clients get out of debt.  I draw no judgements as I don’t think morality enters the bankruptcy arena.

My job is to help them both get a fresh start, however, their situations help illustrate the unfairness of the means test.

Client 1 is a single gentleman earning just over $110,000 per year.  He owns a house that is in foreclosure with a mortgage that has not been paid for 18 months.  He owns two cars and has two car payments.  He has no children and withholds a significant amount of taxes each pay period.

Client 1 passes the means test and qualifies for chapter 7 bankruptcy.

Client 2 is a single Mom living with her daughter.  She earns just over $75,000 per year.  She lives in a rental apartment and is current on her rent.  She owns an old car and has no car payment.  She has a significant amount of student loan debt that she is current on.

Client 2 does not pass the means test and currently is not qualifying for chapter 7 bankruptcy.

Without further discussing the specifics of each case or getting into the science of the means test, I use this simple example to illustrate the unbalanced nature of the means test.

Why does client 1 get the benefit of a quick and efficient chapter 7 while client 2 may be forced into a burdensome chapter 13 that in reality, she probably can’t afford?

Do I tell client 2 to trade in her used car and lease a brand new car which would actually help her qualify for chapter 7?  Why is she punished for her frugality?  Why should she have to incur new debt in order to get rid of old debt that may eat into her fresh start?

Too many interesting questions with some odd answers.

The scales are tilted and the balance here is off.

After seeing so many similar situations, I truly believe that the yin of “consumer protection” needs to be better balanced with the yang of “bankruptcy abuse.”

Image courtesy of Elliot Brown (Flickr).