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.

©Copyright 2005 by Retro Marketing.

Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to debt consolidation and credit counseling, and HomeEquityHelp.com, a site devoted to information regarding home equity loans.

---

Individual Voluntary Arrangements- A New Alternative to Bankruptcy

This May, the Department of Trade and Industry in the... Read More

Debt Management - Is It the Right Choice For You?

Debt Management plans offer credit counseling clients a different and... Read More

Mandatory Credit Counseling for Those Considering Bankruptcy

Most Americans are aware of the sweeping changes in U.S.... Read More

Bouncing Back from a CCJ

Should you be unfortunate enough to face a CCJ ?... Read More

Debt Handling Solutions

Sometimes debt can seem overwhelming. In those instances, or even... Read More

Learn How to Get out of Debt

Debt is becoming number one problem in the United States... Read More

Credit Repair? Its All Up to You

Log onto to a search engine such as google.com and... Read More

Is Independence Overrated?

Happy Independence Day from The Money Motivator!If you don't celebrate... Read More

Future Secured? Oh Really?

A headline for a retirement annuities flyer declares "Future Secured!"... Read More

Bankruptcy Reform

There are some new bankruptcy laws going into effect before... Read More

Debt Elimination 2

The First Step To Debt EliminationRegardless of your personal and... Read More

Debt Settlement -- Why the Critics Are Wrong

After October 17, 2005, a lot of people are going... Read More

Credit And Debt Relief--A One Stop Solution

Amy Wright, 34, was extatic when her realtor showed her... Read More

Free Quick and Easy Money Saving Tips ? Part 1

With the high cost of gasoline and the amount of... Read More

Think for a Change

I'm not sure where it originated, but I've heard it... Read More

UK Debt When Moving Abroad

The idea of moving abroad to escape debt seems to... Read More

Slowing Spending - The Key To Your Debt Plans Success

Anyone who embarks on a debt reduction program should know... Read More

Debt Free Living - 5 Tips To Get Out Of Debt

A few times I wonder what sort of credit system... Read More

Learn The 15 Debt Elimination Steps You Must Take Immediately!

What Everybody Needs To Know...Learn The Truth About Debt Elimination... Read More

How to Protect Yourself: Debt Collections

So you are getting collection calls? You're desk is full... Read More

Debt: Dont Pay Your Minimum Balance

Almost all Americans carry credit card debt. Actually, over 40%... Read More

Currency Trading Fee Concept

Troubles with Global Economy; Do you see future problems with... Read More

Start Small and Your Wealth Will Get Bigger

We've all heard the phrase, "You have to start somewhere."... Read More

Five Hot Tips To Get Out Of Debt Forever

The financial and psychological burden of being in debt causes... Read More

Debt and Your Dreams

You may not realize what that credit card bill is... Read More

Bank Like a Banker

The business of banking has changed dramatically over the last... Read More

Should You Invest In Savings Or Payoff Your Debts?

I have faced this financial question 8 years ago and... Read More

Budgeting and Debt Management

Debt management (specifically unsecured) is the first step to taking... Read More

Taking The Plunge Into Bankruptcy

Bankruptcy is one of the most difficult things a person... Read More

Reduce Your Debt

Do you want to reduce your debt? Having trouble paying... Read More

What Is A FICO Score?

Your FICO score or credit score as it's commonly called... Read More

The Effects of Consumer Debt

Consumer Borrowing Consumer borrowing in the UK has now crashed... Read More

Credit Counseling ? Signs That You May Need Help

Credit counseling is a viable option for those who are... Read More