Tuesday, March 08, 2005

Bankruptcy Reform

After years of failed attempts to reform bankruptcy laws, Congress is on the verge of passing bankruptcy reform. Under the reformed bankruptcy statues, to declare for Chapter 7 bankruptcy, which wipes clean your debts, individuals will now have to have an income that is below the median income in their state and/or have the inability to pay $6,000 over five years. This reform will force more people to declare Chapter 13 bankruptcy, which requires a repayment plan.

I think for the most part, this a good reform to bankruptcy statues. According to an editorial in the Washington Post, close to 80 percent of those who file for bankruptcy will still be eligible for Chapter 7 protection, and only 10 percent of consumer bankruptcy will be effected. I don't think people will have to worry about bankruptcy courts hounding grandma to repay her $50,000 in medical bills, if she's living on Social Security. Not to mention, it makes sense that people who have the ability to pay back their debts, should be obligated to do so. While I think this is a good reform, I find it comical that this reform has been pushed by credit card companies for years when they've been passing out their credit cards out like candy to college students, who in turn, run up huge debts, and then are later forced to declare for bankruptcy.