Friday, February 24, 2006

New Bankruptcy Laws

Per the Ap and the National Association of Consumer Bankruptcy Attorneys, the new laws that reformed bankruptcy requirements and went into effect October of 2005, is not “fair”:

A report released by the National Association of Consumer Bankruptcy Attorneys was based on an analysis of 61,335 people who have gone to credit counseling agencies, the required first step before filing bankruptcy under the law that took effect on Oct. 17.

Of the 61,335, 97 percent were unable to repay any debts and 79 percent had gotten into financial trouble because of job loss, huge medical expenses or the death of a spouse, the report said.

Forgive me for being a bit skeptical of a report from the NACB four months into the new law………………..This trend reported by Lundquist Consulting, appears to show that the law is having the impact that was intended:

Figures released last month by Lundquist Consulting Inc. showed a sharp drop in the number of bankruptcy filings since the Oct. 17 deadline. Within the smaller number overall, a greater proportion were made under Chapter 13 versus Chapter 7 of the code. Nearly 60 percent of filings made after Oct. 17 came under Chapter 13, compared with the usual 30 percent under the old regime, according to the figures.

Under Chapter 13 the debtor is deemed able to pay their bills at an adjusted schedule and under plan that is of lighter burden. Chapter 7 allows the debtor to walk away entirely from their debt. The key intent of the bill was to prevent people with above average incomes from qualifying for Chapter 7 unless meeting special conditions.