Why Bankruptcy Reforms?

On October 17, 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took affect. This piece of legislation represented the most drastic set of changes to U. S. bankruptcy laws in more than 25 years and changed the way Missouri bankruptcy services files bankruptcy cases. Why did Congress take this step?

In 1998, filings of bankruptcy petitions in the United States reached one million and Congress began consideration of reforms. In the decade from 1994 to 2004, filings steadily increased, topping out at an alarming 1.6 million for 2004, with 37,000 of those with Missouri bankruptcy services statewide. As a result of this growing trend, the U. S. House of Representatives Judiciary Committee felt that debt relief by bankruptcy was too convenient a solution and was overused, ignoring other means of relief, such as debt counseling, debt consolidation or refinancing.

The losses suffered by creditors from this increase in filings were significant and detrimental to the nation's economy, testified witnesses to the Committee. In 1997 alone, more than 44 billion dollars in debt was discharged in bankruptcy filings, a total that calculates out to $110 million dollars a day and $400 dollars per household. These losses to creditors were eventually passed onto responsible Americans who paid their bills in the form of higher down payment amounts, higher credit card interest rates and higher retail costs.

Congress also determined that the present bankruptcy laws contained loopholes and, sometimes incentives, which could encourage excess filings and tolerated abuses by debtors, attorneys and other professionals. In 2002, the United States Trustee Program began a civil enforcement initiative whereby it identified abuses in the bankruptcy system. A part of the Justice Department charged with overseeing the bankruptcy process, this program identified a number of alarming abuses by debtors, attorneys and others including incorrectly filed bankruptcy documents and discharges that should have been challenged.

Lastly, Congress determined that some debtors who filed Chapter 7, known as absolute bankruptcies, were, in fact, financially able to repay some of their indebtedness. Until these reforms, there were no laws in effect to require debtors who were able to repay some of their debts from present or future earnings to do so.

There was opposition to the reforms the Committee drew up. Opponents testified that overuse of bankruptcy was not widespread, as the Committee believed, and was mostly limited to circumstances beyond people's control such as medical bills, layoffs or the death of a spouse. Despite these claims, the Committee proceeded with the sweeping reforms which now include mandatory debt counseling and a "means test" to determine suitability for filing bankruptcy.

Missouri bankruptcy services is well versed in these new requirements and have the expertise to guide your through the new requirements and tighter restrictions of the bankruptcy process.



For experienced, knowledgeable and trustworthy bankruptcy assistance, contact the attorneys from www.legalhelpers.com. Call toll-free 800-260-1402 today for your initial free consultation or come into one of their 100 offices across the country.