Bankruptcy is A Christian Idea

Bankruptcy in many ways is a Christian concept.  American bankruptcy laws have Biblical roots.  The seven-year waiting period between personal bankruptcies that was the law until 2005, for example, is based upon Deuteronomy 15:1-2

At the end of every seven-year period you shall have a relaxation of debts, which shall be observed as follows. Every creditor shall relax his claim on what he has loaned his neighbor; he must not press his neighbor, his kinsman, because a relaxation in honor of the LORD has been proclaimed“

and Leviticus 25, which describes the regulations both for a seventh year Sabbath and a fiftieth year of jubilee.

Earned Income Credit Fully Exempt in Oregon

As explained in a recent article arguing in favor of a federal exemption for the Earned Income Credit, the federal credit, created by 26 U.S.C. §32 (1994), is a refundable tax credit provided for low income workers who have dependent children and who maintain a household. A low income taxpayer can get the credit, in the form of a check or automatic deposit into a bank account, even if the amount of the refund is larger than the amount of tax paid that year.

In Oregon we have an exemption specifically protecting the Earned Income Credit and keeping it entirely exempt from exectution by a debt collector with a judgment.  This exemption also applies to the trustee in a bankruptcy case. 

Bankruptcy Modification of Home Loans

Bankruptcy allows change of loan terms for loans on many types of real estate.  The reason this power is given to the bankruptcy courts, is that a bank or other lender would only recover the value of the property if it went into foreclosure.  By changing the loan terms to give the lender the same amount of money it would get if it foreclosed, the borrower would get to keep using the property without any loss to the lender.  The technical term for this process is called, believe it or not, “cramdown”.

Congress allows cramdown of the loan balance to the property value in three types of bankruptcy cases.  A cramdown can be ordered in cases under chapters 11, 12 and 13.