Loan and Equity Help

Between 1994 and 2004, 1.6 million people filed for bankruptcy in the United States and many used a bankruptcy lawyer in Washington DC.  That’s one in every three hundred people.  Doesn’t sound like a lot?  Well, consider that in 1984, only about 300,000 people filed for bankruptcy in the US.  That’s a 533% increase in 20 years.  As the result, the US House of Judiciary Committee decided the old Bankruptcy Code, that hadn’t been updated in 25 years, needed a sweeping and immediate overhaul.  They felt that bankruptcy discharge was too easily obtained and far overused, having become an easy remedy for overspending and providing no lesson to debtors who were likely to commit the same mistakes again. 

In 1997 alone, more than 44 billion dollars in debt was discharged by bankruptcy fillings.  That is 110 million dollars a day and 400 dollars per US household.  Creditors testified in the Judiciary Committee’s hearings that these losses were substantial, detrimental to the nation’s economy and eventually passed on to reliable consumers in the form of higher interest rates for credit, higher down payments and generally higher prices for goods.  

The Judiciary Committee also felt that there were loopholes in the bankruptcy laws which petitioners and attorneys had abused.  These included excessive filings and even incentives to file bankruptcy.  In 2002, the United States Trustee Program, a role of the Justice Department that oversees the bankruptcy process, started a civil enforcement initiative whereby it identified abuses in the system.  This program uncovered an alarming number of misuses by debtors, lawyers and others including incorrectly filing documents and discharges of debt that should have been challenged.

The Committee also found that often filers of Chapter 7 bankruptcy should have been required to file Chapter 13, or an organized repayment plan, as they proved competent of repaying their debts but were not required to do so under the law at the time.  A bankruptcy attorney in Washington DC can help you with the new “means test”, which now finds which type of bankruptcy you are qualified to file.

Opponents to the plan rallied to contest the proposed reforms.  They testified that bankruptcy was neither overused nor abused and that changing the law to make bankruptcy tougher to obtain would be more detrimental to the economy.  They cited that 91% of filers had suffered either job loss, divorce or overwhelming medical bills.  But, in spite of arguments to the contrary, President George W. Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 on October 17 of that year. 

Generally, the new reforms included:

•    Mandatory credit counseling
•    Passing a “means” test to determine ability to repay debts.
•    Proof of income and tax returns required
•    Mandatory financial management education
•    Greater priority for child support and alimony
•    Tougher requirements on bankruptcy lawyers for accuracy
•    Less “automatic stays” for filers 

A bankruptcy attorney in Washington DC will have further details on the new reforms.