Weekly Column by Congressman Doc Hastings: Reforming Bankruptcy Laws to End Abuse

Reforming Bankruptcy Laws to End Abuse
Weekly Column By Congressman Doc Hastings
April 8, 2005

The modern day federal bankruptcy system was created more than 20 years ago to help provide a fresh start for those with real financial need and to promote the responsible collection of debt.

Bankruptcy should be an option of last resort for those who are truly in need. Unfortunately, some individuals are abusing the system as a means of completely absolving themselves from their financial obligations. When these debts aren't paid by those responsible, costs increase for everyone else.

For eight years Congress has considered improvements to our bankruptcy laws. The Senate recently approved bankruptcy reform legislation by a vote of 75 to 25. This week the House of Representatives is expected to take up the issue.

The common sense reform proposal would simply ensure that those with the ability to pay their debts are held accountable. The bill closes loopholes that allow individuals with sufficient means to entirely escape repayment of their debt.

Those who legitimately need financial protection as a result of a serious medical condition, unemployment or other special circumstances would still have the ability to file for bankruptcy.

In addition, the reforms are aimed at protecting those who are innocently affected by bankruptcy. For example, protections for child support and alimony payments are strengthened by requiring deadbeat parents to pay these debts even after filing for bankruptcy. The bill also exempts certain retirement plans and education IRAs for debtors' children from the claims of creditors.

Consumer education is enhanced by requiring credit counseling prior to filing for bankruptcy and financial management courses after filing. Further, the bill requires lenders to provide greater disclosure about the consequences of paying only the minimum amount due each month. Educating consumers so they can make informed decisions about their personal finances will go a long way towards preventing the need for bankruptcies.

It is my hope that improvements to our bankruptcy system can be enacted into law this year.

http://hastings.house.gov/Read.aspx?ID=168