On October 17, 2005, President George W. Bush signed into law the most sweeping changes to the US Bankruptcy Code in nearly 25 years. With the adoption of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, drastic changes were made to who can file bankruptcy and how their bankruptcy petition will be handled. Mandatory education on debt and smart budgeting were made part of the procedure as well as a “means” test to qualify potential filers for bankruptcy. Bankruptcy lawyers in Florrisant and their staff are fully trained in the new laws.
Why did Congress take this step? Bankruptcy filings have climbed steadily in this country. Between 1994 and 2004, filings increased, topping out at 1.6 million in 2004. As a result, the US House of Representative Judiciary Committee felt that debt relief was too easily acquired and too sweeping. They felt that bankruptcy was overused and had become a remedy for excessive spending and did nothing to prevent filers from making the same mistakes again. Florrisant bankruptcy lawyers have information available to you on how to move forward after the bankruptcy.
Creditors interviewed before the committee expressed the opinion that losses suffered by businesses as a result of personal bankruptcy were significant and detrimental to the nation’s economy. In 1997 alone, more than 44 billion dollars in debt was discharged in bankruptcy filings. That calculates out to $110 million dollars a day and $400 dollars a day per US household. Creditors testified that these losses were eventually passed along to other more responsible consumers in the form of higher interest rates, higher down payments and generally higher prices for goods.
The Judiciary Committee also felt that there were loopholes in the bankruptcy laws which petitioners and lawyers had abused. These include excessive filings and even incentives to file bankruptcy. In 2002, the United State Trustee Program, a division of the Justice Department that oversees the bankruptcy process, began a civil enforcement initiative whereby it identified abuses in the organization. This program uncovered an alarming number of abuses by debtors, attorneys and others including incorrectly filing documents and discharges of debt that should have been challenged.
Congress also determined that some filers of Chapter 7, or absolute bankruptcy where nearly all debt is discharged, should have filed Chapter 13, or an organized repayment plan wherein some or all debt is eventually repaid. Until the passage of the new reforms, there weren’t any laws in effect to require debtors who were able to repay debt to do so. Bankruptcy lawyers in Florrisant can help you take the new “means test” to determine if you are eligible for Chapter 13 or Chapter 7 bankruptcy.
There were opponents to the new plan who testified that bankruptcy was neither overused nor widespread, as the committee thought. They believed that bankruptcy filings were mostly limited to circumstances beyond the debtor’s control such as layoffs, medical bills or the death of a spouse. Despite this resistance, Congress proceeded with the sweeping reforms.
