Thru the years since 1800, the bankruptcy laws have changed. Today, the stated purposes of the bankruptcy laws is to give the debtor a new beginning in life by discharging debts.
One of the most radical changes in the Bankruptcy laws occurred in 2005. This is when the laws became a lot more complicated than they already were. Evaluating the need for bankruptcy has now taken on a new urgency and significance. The new bankruptcy law can be labeled “NEEDS BASED BANKRUPTCY.” This can also be called “means testing”. Ordinarily, means testing is used by federal and state governments to determine eligibility of citizens for government assistance in the form of food stamps, free lunches for schoolchildren, subsidized rent, social security disability, Medicaid, etc.
The new bankruptcy law uses means testing as a debt collection device to push individual debtors toward payment of private dischargeable unsecured debt as a condition of bankruptcy relief under Chapter 13. It could be called a federal subsidy program to assist creditors in the collection of private debt.
Important Note: The Bankruptcy “system” does not want you to file a Chapter 7 case unless you truly need this type of relief – this is because the creditors do not get paid back under a Chapter 7 Bankruptcy (unless the trustee takes property to pay them back).