Congress Holding Debtors Accountable: 2005 Bankruptcy Law Changes

Under pressure from retailers and other companies claiming losses from increased bankruptcy filings, Congress took steps a few years ago to make it more difficult for individuals to file for bankruptcy. Initially, bankruptcy laws were designed to help people, whose financial debt got out of control and were meant to be a method of giving them a new start. However, over the years many were taking advantage of the bankruptcy laws to continually file bankruptcy as often as allowed by law to get out of paying their financial obligations. This overuse of the system led to more stringent rules to protect creditors often the loser in cases with people who worked the system to their advantage. New laws were designed to prevent those from simply getting out of their obligations. For those who fall into out-of-control debt, the bankruptcy laws exist to help them make a fresh start. Providing the need for financial and debt management as part of the bankruptcy process will provide the needed help while sifting out those individuals who use the bankruptcy laws to simply create debt and have it wiped out by the court periodically. In most instances the laws still allow for discharging all legally dischargeable debt for those whose only way out is through bankruptcy. However, it also makes it tougher to meet the demands of the new laws. This may prevent some people from filing for bankruptcy, either Chapter 7 or Chapter 13 from seeking the help offered through bankruptcy, only making their financial life more miserable. In 2005, the U.S. government seemed to agree with lobbyists for credit companies and determined that too many debtors were allowed to get out from under their self-created debt by filing for bankruptcy. Many were pointing to a few cases in which people with the means to make good on their obligations were simply filing for Chapter 7 bankruptcy and leaving the creditor holding the balance. The "new" law, which was supposed to provide additional help to consumers in handling their credit load, also added many requirements, including the need to go through credit counseling services before filing bankruptcy. The counseling is also to provide alternatives to bankruptcy, attempting to move more people from Chapter 7 bankruptcy into a plan that will provide the creditors receiving payments through Chapter 13 filings. The "new" bankruptcy laws added extra burdens for the debtor as well as the attorneys, which not only increased the amount of information collected for bankruptcy filings, but also included many new financial requirements that are beginning to resemble the current income tax code. In order to understand the new rules and regulations as well as the reporting requirements, many attorneys will need to specialize in bankruptcy.

If you’d like to learn more: call us to speak directly with an attorney for a free, no obligation, consultation to see if you qualify for bankruptcy and if it is the right decision for you and your family or your business.

Wessler Law Firm is a small family owned law firm specializing in bankruptcy law since 1982.

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Disclaimer: This article is meant for reference only, and is not intended to be legal advice.

For legal counsel regarding your situation, please consult an attorney licensed in your state.