Bankruptcy Law Changes and Amendments in the Reform Act
According to the United States Constitution, Article I, Section 8, Congress alone is vested with authority for "establishing an uniform system of bankruptcy throughout the United States." The basic operation of these bankruptcy laws provides the framework for the application of 11 USC. 101, et. seq. (the "Code"). In addition to the Code, all U.S. Courts maintain local rules that supplement Federal Rules and Code requirements. In application, Judges tend to assign greater weight to local case law precedent, i.e. decisions rendered within the district over those rendered in remote parts of the nation. Further, state law determines many issues in Chapter 7 and Chapter 13. For example, the existence of a debt, property exemptions, and ownership rights of occupancy are all properly determined under state laws. See bankruptcy law - all 50 States for annotations and tips.
Effect of the New Bankruptcy Law Reform Movement
Since 1994, new bankruptcy laws threatened to restrict, and in many circumstances, abolish consumer bankruptcy relief. These new bankruptcy laws targeted consumers and wage earners while leaving business reorganization for large corporations intact. A new reform act finally passed as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (see new bankruptcy laws for summary), representing the largest departure from traditional jurisprudence in history of U.S. Bankruptcy Courts. Judges lost discretion. Debtors were saddled with onerous burdens of proof and penalties. Creditors received unprecedented latitude enforcing penalties against debtors. (see also new bankruptcy law amendments rejected). The trend continues today because of the unrestricted influence of lobbyists over U.S. lawmakers.
These new laws create overlapping formulas designed to limit qualification and increase burdens upon debtors across all avenues of relief. However, for many debtors, the effect of these changes and new bankruptcy law definitions will go largely unnoticed in final results. Primarily, the largest impact will be felt those who earn average incomes or higher, without insulation from liability through incorporation. Expect numerous attacks upon the constitutionality of these new laws. Also expect new growth in boutique law firms capable of providing middle Americans with similar privileges and corporate options currently enjoyed by large businesses.
The Driving Force Behind New Bankruptcy Law Reform Acts
More cases are filed each year because more American families are burdened with crushing debt, which indicates fundamental structural changes in the U.S. economy. These changes combine to increase not only bankruptcy filings, but foreclosures, repossessions, utility disconnections, credit card defaults, debt litigation, as well as fuel rising demand for services provided by lenders - debt consolidation loans and so called "independent" non-profit consumer credit counseling supported by credit card companies. Despite cries of crisis, commercial lenders continue soliciting credit card applications with higher spendable limits at an alarming rate.
The factors contributing to filings are: corporate downsizing, outsourcing jobs internationally, income disruptions, loss of high paying jobs, and underemployment of professionals. Most stunning, based on a joint national study conducted by Visa® and MasterCard®, no more than 19% of all cases filed are caused by overspending or recklessness. Unfortunately, over 80% of all filings involve either job loss, disability from illness/injury, or contested divorce. Already stretched beyond return, any one of these unexpected events tends to push average families over the edge.
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