How did the 2005 Bankruptcy Reforms Affect Consumers?
By Walter Bradley | Published on October 27, 2011 | 0 Comments
In 2005, the US Congress passed a blockbuster bill that brought major reforms to the bankruptcy system. While the headlining change of the Bankruptcy Abuse Prevention and Consumer Protection Act, as it was known, was to introduce a “means test” that made it more difficult in general to qualify for a Chapter 7 Bankruptcy, the bill introduced numerous other changes to the process. And while many of these were behind-the-curtains technical modifications that affected bankruptcy lawyers and other professionals in the industry far more than individual debtors, the legislation also contained some less-recognized provisions that had direct impacts on many average Americans.
According to Westminster bankruptcy attorney Walter Bradley, who practices at the Bradley Law Firm, P.C., the major reforms that affected consumers were directed both at the “abuse prevention” and “consumer protection” targets of the 2005 bill.
The most striking of these changes was probably the requirement that individuals wait 8 years, instead of the previous 7 year minimum, between filing Chapter 7 bankruptcies. Though this extension does not affect the average household that files for bankruptcy, in certain situations, individuals may be forced to file repeatedly over a relatively short period – and the new lengthier requirement presents a serious hurdle to those in dire financial situations.
The act also instituted a requirement that individuals who go through the Chapter 7 process complete a credit counseling program, explains the Westminster bankruptcy attorney. While the intent of this change was to educate consumers and reduce the likelihood that they’ll end up in such dire financial circumstances again – a noble mission – its results have been mixed. For those who were forced into bankruptcy because of unexpected or uncontrollable events, the new educational requirement may be unnecessary. The good news is that there’s now a growing network of online credit counseling programs, and this makes completing at least some of the educational requirement easy and efficient, says Bradley, the Westminster bankruptcy attorney.
Finally, in what was a somewhat controversial measure, the new legislation upped the requirements on lawyers involved in the industry, explains bankruptcy attorney Bradley, of Westminster. Bankruptcy attorneys are now mandated to conduct more comprehensive reviews, and case processing has become more intensive. One effect? It has become harder to find a cut-rate bankruptcy attorney. While this is likely a good thing for most, ensuring a level of professionalism in the field that was absent beforehand, it can present a hurdle to those who are in truly dire financial circumstances and will pay for only the cheapest of lawyers.
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*Disclaimer: This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.