One has to begin to wonder if Republicans have completely lost their minds recently.
One only has to look at legislation that has been introduced in the Congress to get the sense that they may have finally lost it.
One example is the bankruptcy bill that has passed the Senate, and which the House leadership is trying to ram through without amendment so that it can go straight to the president.
Normally, how bankruptcy works is that you go to court and say you’re going to file for bankruptcy. A judge then looks over your financial situation and looks to see the reasons why you went into bankruptcy.
If you went bankrupt because of costs out of your control, such as a medical emergency, you get put into Chapter 7 bankruptcy.
This would allow some, but not all, of your debt to be forgiven, and is more lenient than Chapter 13 bankruptcy.
If the judge thinks you went bankrupt because of your own doing, such as a wild spending spree, then you get put into Chapter 13.
This forces you to repay all of your dept in full to all of your creditors, and essentially puts your entire personal budget under the control of the courts until you exit bankruptcy, and allows creditors to take things such as your car and house to pay off your debts.
Chapter 7 bankruptcy was created for two reasons.
The first reason was so that those who have unexpected extreme expenses aren’t sunk if they have to file for bankruptcy.
The second reason is to promote entrepreneurs. Most people who attempt to start a business, fail and file for bankruptcy are also put into Chapter 7.
The bankruptcy bill would change all of this.
The new bill would take the decision of whether to put a bankruptcy file into Chapter 7 or Chapter 13 out of the hands of judges, and put it to a means test.
What this essentially means is if your income is above the median income of your state, you go into Chapter 13, regardless of the reason you were forced in to bankruptcy. If your income is below your state’s median income, you get put into Chapter 7.
For Tennessee, that would mean that anyone making over $37,523 (according to the Census Bureau) would be automatically put into Chapter 13 bankruptcy.
Why is this bad?
If you make over $37,523 in Tennessee and you start a business and fail, instead of going into Chapter 7, and essentially getting a break for being an entrepreneur, you get thrown into Chapter 13, which greatly restricts your ability to try again at starting a new business.
What if you make over $37,523 in Tennessee, and you suddenly have a large medical expense that throws you into bankruptcy?
Instead of the court having mercy on you because of something out of your control and forcing your creditors to give you a break, you must now pay all of your expenses back to everyone, possibly putting you into a state of virtual indentured servitude for years.
This is also a case of biting the hand that feeds you.
The national median income is $43,318. Twenty-six of the 50 states have median incomes below the national median income.
That means, by using the median state income instead of median national income for the means test, citizens of 26 states will be at a greater disadvantage.
What is the makeup of those 26 states? Four of those states voted for Kerry and 22 voted for Bush. Only nine states that voted for Bush have a median income above the national median.
The four states that voted for Kerry and have a median income below the national median income are Maine, Oregon, Pennsylvania and Vermont.
Proponents of this bill claim that change is needed. They feed on the view that those filing for bankruptcy are all just massive spenders who are getting out of debt and claim that credit companies are hemorrhaging cash because of bankruptcy.
These just aren’t the correct facts.
Virtually half of all bankruptcies are due to medial expenses, and it doesn’t matter whether one has insurance or not.
Many others are caused by other excusable reasons, such as an attempt to start a business. Why should these people be forced into Chapter 13?
Meanwhile, credit companies’ profits have been skyrocketing the past few years, despite their claim that bankruptcies are a drag on them.
Welcome to the new Republican nation.

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