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Congressional Reform of the Bankruptcy Laws
Bankruptcy law reform is imminent. Congress is making it a "priority" to change the current bankruptcy laws, making it more difficult to file for bankruptcy. While the legislation has not yet been passed, it has been put on a fast track for 2005. These laws will make people who need to file a bankruptcy subject to pay additional costs and carry heavier burdens. Senator Edward M. Kennedy presented the Senate with many conflicting effects that this change will entail. Furthermore, he argued that this modification "will come out more on the side of the creditors in terms of harassing these extraordinary individuals rather than recognizing that these are hard-working people." Below are five potential consequences of this law alteration.
- Potential Chapter 7 and Chapter 13 bankruptcy clients, including those with low-incomes, will be required to obtain costly pre-bankruptcy credit counseling as a condition to filing.
- People that file bankruptcy will be required to complete a personal financial management course before they can even get their debt discharged.
- The new laws impose a rigid and inflexible formula to determine whether people are eligible for a Chapter 7, making it even harder for people to obtain a fresh start.
- Attorney fees will be more expensive because of the increased burdens that the new law places on debtor's counsel.
- The new laws also eliminate the Chapter 13 "superdischarge" for certain debts.
If the Bills are passed then the president must sign the bills and President Bush fully intends to sign these bills. The provisions of the law will come into effect 180 days later. Additionally, the new laws will force an estimated 30,000 to 100,000 people a year to make payment arrangements under Chapter 13, instead of getting the full protection they need under a Chapter 7.
After nearly eight years of trying, creditors are successfully pushing bankruptcy reform that will restrict many people from eliminating their debt through a bankruptcy. What does all this really mean to you? Consumer rights groups, civil rights groups, and unions say the legislation would "shred a safety net for those who have lost their jobs or face mounting medical bills." Ultimately, these same people will be forced to pay back their debts in the future.
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