Bankruptcy in America

Bankruptcy in America

October 18, 2005

Yesterday, the new bankruptcy bill passed by Congress and President Bush went into effect. As the Christian Science Monitor reported, “The path into bankruptcy is now rougher, the path out is steeper, and the change could hardly come at a more difficult time for many US consumers.” Over the weekend, people endured long lines to file in New Jersey, Illinois, Ohio, Washington, and other states. The new law creates additional financial burdens for many Americans at a time of rising pocketbook challenges. From rising energy prices and interest rates, to increasing credit card debt, Americans are currently facing a financial squeeze like never before, and these new rules will push countless thousands into further financial straits.

• The new law will make it harder for individuals to file for bankruptcy. One of the main changes in the bankruptcy code is the imposition of a "means test" that would require filers earning above a certain income to pay back a portion of their debts. The means test cannot be waived "even if the debtor is seeking bankruptcy relief because of some terrible circumstance beyond his or her control." Debtors must also "pay for credit counseling within six months prior to filing for bankruptcy and complete a financial management course before a judge could wipe out any debts." Ultimately, the changes will "raise certain filing fees, require more documentation and trips to court, and [are] projected to boost attorney fees."
  
  
• Americans are already overburdened with financial concerns. More and more Americans are living month to month, and those are the people who will be in serious trouble under this new bill. Credit card companies are pushing cards that would dramatically increase consumers’ interest rates if they pay late twice a year. People already suffering from high prices at the pump are bracing for higher heating costs this winter because of energy spikes caused by Hurricane Katrina. And the housing boom has caused thousands of first-time buyers to borrow heavily to get their homes.
  
  
• The new faces of bankruptcy are the most vulnerable among us. People who rushed to file bankruptcy last weekend came from all walks of life – single mothers, cancer patients, waiters, former county workers and business owners. In Seattle, WA, a mother "was filing for bankruptcy, in part because of medical bills involving her autistic daughter, and because her husband had been laid off." A substitute teacher from Chicago decided to file because she feared "medical expenses from a recent cancer diagnosis could add to her mounting credit card debt." In New York City, a college student "was filing a petition on behalf of a friend who lost her job and who has bone marrow cancer and breast cancer.” Even the victims of Hurricane Katrina didn’t get a pass. As the Mississippi Clarion-Ledger editorial board wrote yesterday, "New federal laws take effect today that make it more difficult to file bankruptcy to gain protection from creditors, coming at a time when bankruptcy may be the only option for some Americans devastated by Hurricane Katrina."