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Bankruptcy Law Unchanged — For Now
By Attorney Donna J. Brooks, Winsted
Rumor has it that the bankruptcy laws are changing on January 1. Not so! Although Congress has had legislation pending in one form or another for about three years, it has not yet been finalized. Consumers who are thinking about bankruptcy still have time to get in under the old and more generous rules.
One of the indirect effects of the September 11 tragedy is that the Congressional conference committee charged with reconciling the differences between the Senate and House versions of the Bankruptcy Reform Act of 2001 didn't meet on September 12 as planned. Obviously, there have been other more urgent matters to deal with. If this bill does pass and is signed by President Bush, it will go into effect six months later.
Some Congressional leaders are now concerned that the economic downturn makes it a bad idea to pass this law. According to Senator Paul Wellstone (D-MN), "In the best of times, this bill would be terrible for consumers and regular working class families, but its effects will be all the more devastating now that we have a weakening economy."
Representative Jerrold Nadler (D-NY) also disagrees with the legislation and has recently said, "Consider the danger we face from creating uncertainty and excess litigation in the bankruptcy system. Let us not do anything that might set back the nation's chances for economic recovery."
The proposed law, if passed, will make it harder for debtors to file a Chapter 7 bankruptcy, and will require many to file a Chapter 13 repayment plan instead. This law has been vigorously pushed by lobbyists for the large banks and the credit card industry. The bill does nothing to curb the exorbitant credit card interest rates that drive many to file bankruptcy in the first place. The bill also does not place any responsibility on the credit card companies who offer excessive credit to consumers without regard to their ability to pay it back.
For now, the "fresh start" that consumers have come to rely on when in a desperate financial circumstances is still there. But just for now.
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