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New Bankruptcy Law – Where’s The Consumer Protection?
By: Charles Essmeier
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.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including
http://www.End-Your-Debt.com , a site devoted to debt consolidation and credit counseling, and
http://www.homeequityhelp.net,
a site devoted to information regarding home equity loans.
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