Monday, October 17, 2005

    A Positive Move For Consumers

    Starting today it's tougher to file for personal bankruptcy.
    The new law makes it harder to liquidate. Those filing have to meet certain income requirements.

    In addition, anyone wanting to file will have to undergo credit counseling and produce documents including tax returns, pay stubs and statements from their creditors.

    The idea behind the new law is to prevent abuse of the bankruptcy system.
    Some might think this is a victory for big business, for banks and financial institutions - not true. Let's say your friend asked you for $500. You don't question your friend what the money will be used for - you trust your friend to pay you back. Your friend decides for whatever reason that paying you back is not possible. You take your friend to small claims court and the judge tells you that since you have more assets than your friend you will just have to suffer the loss - to bad for you. On the other hand, if the judge orders your past friend to pay you back even in payments - did you really win anything more than just what you were owed in the first place?

    For too long irresponsible people have abused the bankruptcy laws - living outside of their means, buying merchandise that really isn't needed, knowing that - if worse comes to worse, they can just file for bankruptcy and start the process all over again. These people basically steal from banks and businesses - and we all end up paying for their losses. The change in the bankruptcy law doesn't change the irresponsible mindset of individuals:
    "They have changed the bankruptcy rules but they have not changed any of the underlying reasons why people file bankruptcy in the first place," said John Ventura, a bankruptcy attorney in Houston and author of "The Bankruptcy Kit," adding that his clients often face medical hardship or job loss.
    Laws that make people responsible for their own actions are good laws - and we need more such laws.
    The new law makes it tougher for U.S. debtors to cast aside credit card and other debt by filing under Chapter 7, the most popular type of personal bankruptcy, which enables consumers to wipe out most of their unsecured debts. Most consumers whose incomes are above the median for their state must file under Chapter 13, which requires repayments of debts over five years.

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