Posted by Todd Zywicki:
Atlanta Journal-Constitution Article on Bankruptcy Reform:
An article last week before the bill signing in the AJC, "[1]Going for
Broke Won't Be So Easy". The reporter actually went to a day of
hearings (it doesn't say for sure, but it looks like they were
probably section 341 hearings) and has some reports from the front
lines:
A young woman in office attire was trying to hold on to her house
and her car.
"Were you behind on your property taxes when you purchased the
vehicle?" asked the trustee.
"Yes," she answered meekly.
Minutes later, a casually dressed, middle-aged couple took her spot
at the hearing table.
They didn't say what had gotten them into trouble, but despite
$60,000 in annual income and an additional $6,000 or so in estate
money, they had fallen far behind on house payments and other
debts. It was their second time in bankruptcy.
A trustee asked an elderly man, in his third trip through
bankruptcy court, why he had racked up $18,000 in income tax debts
over a period of several years.
"I forgot to pay," he shrugged.
An interesting thing briefly suggested here is the extent to which tax
problems force people into bankruptcy (usually, however, not because
they just "forgot" to pay their taxes). There aren't many good studies
on this, but some have concluded that as much as 10% of bankruptcy
filings are caused by tax liabilities (and that doesn't count those
who would have alot more money available to pay their debts but for
having to pay their taxes or pay their taxes because they are
generally nondischargeable in bankruptcy). For those keeping score at
home, this exceeds the number of bankruptcies traditionally thought to
be caused by health problems, death in the family, college expenses,
and gambling.
Given that most lawyers I talk to report that they often see tax
problems as a primary cause of consumer bankruptcy, it certainly would
be useful if someone had access to data to look at this question. For
some reason, however, empirically-minded bankruptcy scholars seem to
be largely uninterested in investigating the extent to which
bankruptcies are caused by tax liabilities or excessive tax burdens.
References
1.
http://www.ajc.com/hp/content/auto/epaper/editions/sunday/news_2426e08fa29bc1a9004f.html
_______________________________________________
Volokh mailing list
[email protected]
http://highsorcery.com/cgi-bin/mailman/listinfo/volokh
