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New Bankruptcy Laws

In: Business and Management

Submitted By paperedup
Words 2977
Pages 12
On April 14th, 2005, the United States House passed a business sought bankruptcy bill with a 302-126 vote, while the Senate had passed it on March 10th, with a 74-25 vote. Bankruptcy reform was initially introduced in 1998, but had difficulty in getting passed until now. This bill is a huge victory for credit card companies and retailers, but will undoubtedly affect millions of Americans in a negative manner (www.onlin.wsj.com/20050415). The bill is the first major change to the bankruptcy laws in twenty-seven years (www.pbs.org/3.25.05). The bill will make it harder for consumers to eliminate their debt with the use of bankruptcy. There are now new restrictions and a “means-test”, which determine if consumers can have their debts erased by Chapter 7 bankruptcy or Chapter 13 bankruptcy. The bill also makes attorneys liable for any inaccuracies in their clients’ bankruptcy filings. This bill has several controversial issues associated with it and will be explained later, along with the actual provisions of the bill. To understand the controversy, one must first understand what bankruptcy is and the difference between Chapter 7 and Chapter 13 bankruptcy filings. Chapter 7 bankruptcy is a liquidation proceeding in which the debtor turns over all of their non-exempt property to a bankruptcy trustee who converts it to cash to pay off the creditors. Within four months, the debtor is usually relieved of all obligations. In many cases, the debtor has no assets to lose, so Chapter 7 gives the individual a relatively quick “fresh start” (www.bankruptcyaction.com). The most common reasons for filing Chapter 7 bankruptcy include: unemployment, large medical expenses, extremely overextended credit, marital issues and other large unanticipated expenses. Chapter 13 bankruptcy is not as simple. Individuals who wish to pay off their debts in a three to five year period…...

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