The new bankruptcy law: Are the banks really surprised?

BAPCPA is the name of the new bankruptcy law.  (I still call it the new law but it is not so new anymore),  The banking lobby had pushed this legislation for years to combat supposed fraud by debtors and the alleged  influence of  attorneys wrongully encouraging individuals to file needless bankruptcies.  The name of the new statute, the Bankruptcy Abuse Prevention and Consumer Protection Act, is really an insult to the typical individual debtor who due to loss of job, illness,divorce or other reason has no choice but to file bankruptcy.  As a Fort Lauderdale bankruptcy attorney, it has long been apparent that it is vary rare that fraudulent activity is the basis for filing bankruptcy.

These thoughts came to mind to express here after reading a recent article in Time Magazine, with the title and cover, “The New Sheriffs of Wall Street.” (May 24, 2010).  One of these new sheriffs, Elizabeth Warren, is a Harvard professor who has studied consumer bankruptcies. (She now heads the congressional panel that is a  watchdog for TARP funds and is  an advocate of  new consumer finance regulations.)  The following quote from the Time article is of no surprise to this fort lauderdale bankruptcy lawyer.

“In 1978, Congress passed a revamped bankruptcy code, making it easier for businesses and individuals to start anew.  Warren was teaching law as the time in Houston and decided to investigate, initially expecting to find that the system was filled with sleazy debtors. She found instead that most bankruptcies resulted from job loss or illness at home, a situation made worse by banks that were increasingly learning to trap people in costly debt cycles.   How?  Partly by confusing them.”

The causes for people needing to file bankruptcy were not  eliminated or reduced by the new law, and again bankruptcies are booming.  And many an honest debtor would not file bankruptcy if the banks did not unilaterally greatly increase interest rates on charge accounts.

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