New Bankruptcy Law - Where's the Consumer Protection?

On April 20, 2005, President Bush signed into law the Bankruptcy Abuse and Consumer Protection Act, a piece of sweeping legislation that brought about the most sweeping changes in personal bankruptcy law in the last quarter century. This bill, which takes effect in October 2005, passed with the overwhelming support of both parties of congress, claims, through its very name, to offer "consumer protection." Does it? How are consumers "protected" by this bill?

The purpose of the new legislation, is to eliminate "bankruptcy of convenience". Sponsors of the bill allege that most consumer bankruptcy cases involve irresponsible spenders who have shopped or gambled their money away and now do not wish to pay their creditors. They rightly point out that bankruptcy costs the credit card companies billions of dollars each year and that those costs are passed on to consumers in the form of higher interest rates. By making it harder for those with problem debt to file for bankruptcy, legislators say that more people will pay their bills, the credit card companies will save billions of dollars, and the resulting savings will be passed on to consumers in the form of lower interest rates.

The bill is lengthy, but key points are as follows:

• Those considering bankruptcy will have to pass a "means test." If their income is above a certain threshold, they will not be able to file under Chapter 7 of the Federal bankruptcy code, which wipes out debt and gives the debtor a fresh start. Instead, they will have to file under Chapter 13, which establishes a five year repayment plan.

• There are no provisions in the law for debt problems caused by job loss, illness or other traumatic events, despite studies that show that these are the cause of most bankruptcy cases.

• Attorneys will now be responsible for the accuracy of paperwork filed by their clients. This will probably result in fewer bankruptcy attorneys, with those that continue to practice raising their fees substantially in order to offset their additional liability.

In short, most consumers are no longer protected from job loss or illness by being able to file under Chapter 7 and they will have less help from competent attorneys due to the new liability provision of the bill. There is little to "protect" consumers in the Bankruptcy Abuse and Consumer Protection Act. The sole benefit for consumers resulting from this bill will be lower interest rates and fees from the credit card companies, who will save billions of dollars as a result of this legislation. Of course, should the credit card companies choose to keep the savings, rather than pass them on to their customers, then consumers will be left with no benefit or "protection" at all.

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Debt Relief Information:

Related Articles


Can You Escape the Trap of Ever Growing Debt?
It's difficult not to be concerned when facing numbers like these:43% of U.S.
A Debt Elimination Process Must Be Initiated From You.
The first and maybe most important step in a debt elimination process, is to acknowledge there's a problem and realize that something has to be done with your situation. Some do it before it is too late, though an asthonishing number of people seem to act as if this is not their situation at all.
Drowning in Debt? Tips and Tricks for Getting Out of Hot Water with Creditors
Do you, like millions of other Americans, feel like you're sinking in an ocean of credit card debt? Well, fear not--there are many options for reducing your debt way before you have to be concerned about receiving notices or daunting telephone calls from debt collectors. The important thing to remember is to be proactive in handling your credit card debt.
Reduce Your Debt
Do you want to reduce your debt? Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?You're not alone. Many people face a financial crisis some time in their lives.
Stop Debt Collectors
Can you stop debt collectors ? . .
Credit And Debt Relief--A One Stop Solution
Amy Wright, 34, was extatic when her realtor showed her the three bedroom townhome overlooking the lushious golf course. It was exactly the home she was looking for.
Why You Should Get Out of Debt Today?
The main reason for getting out of debt today, is because people with little or not debt have more control over their future:1. They have more discretionary income, meaning that you won't be living pay check after pay check as you probably are right now.
How to Get Triple A Credit in 25 Days
Good credit is everyone's dream. A wise use of credit can go a long way.
UK Debt When Moving Abroad
The idea of moving abroad to escape debt seems to be more of a common practice these days. People with failed businesses or swamped in debt seem to think moving abroad will give them a fresh start, free from debt and allow them to build a new life.
Bankruptcy: Which Chapter Do I File?
There is more than one kind of bankruptcy. You should understand your options before deciding which chapter of bankruptcy you are going to file for, or if you are going to file for bankruptcy at all.
Debt Elimination 3
Planning To Achieve Debt EliminationOnce you have started the process of changing your debt mindset to be against taking on consumer debt, then that is something you need to continue until it becomes the norm in your life. In some ways it is like stopping smoking; trying on will power alone is not enough, you need to get to the source of your problem and permanently change it.
Debt Management Systems
What is a debt management system, and when do you need it? Like any kind of management system, debt help systems can be good or bad. We will take a look at what you can do to manage your debt better.
Debt Elimination 1
If you have multiple debts, you may well be wishing you had a debt elimination wand to wave and make all the debts disappear. You would probably wish even harder for that magic wand if you were falling behind with, or at least struggling hard to keep up with, the monthly payments on those debts.
Christian Debt Consolidation - Feel Comfortable About Managing Your Debt
Many Christians feel uncomfortable with the notion of being in debt, and even more so when the debt has gotten out of control. Some say that it is not acceptable for Christians to owe any money, even for such necessities as a home.
Is Independence Overrated?
Happy Independence Day from The Money Motivator!If you don't celebrate "The 4th of July" like we do in the United States, today still presents you with an awesome opportunity to examine your independence.Independence means the quality or state of being dependent.
Senate Passes New Bankruptcy Law
The United States Senate passed a law on March 10, 2005 that changes the bankruptcy laws in America. It is expected that the House of Representatives will look to pass the same bill in April, which will send it to President Bush for his signature.
You Can Make Financial Resolutions Anytime
The New Year often brings with it a desire to right the wrongs in yourlife. From this desire springs the tradition of New Year resolutions.
New Bankruptcy Legislation May Make it Harder to Find an Attorney
The recently passed Bankruptcy Abuse prevention and Consumer Protection Act will make it harder for people with problem debt to have their debt eliminated through filing for bankruptcy. This new legislation will make it harder to have debts wiped out by the courts, and will require more debtors to pay back some or all of their debts.
Bankruptcy Abuse
Bankruptcy is little more than a smack on the hand these days. Creditors are certainly not going to look at you as a wise credit risk after bankruptcy, but that will probably not stop them from extending credit to you anyways.
Taking The Plunge Into Bankruptcy
Bankruptcy is one of the most difficult things a person has to do. The decision to file bankruptcy is a hard one.