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Wednesday April 06, 06:06
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New bankruptcy law to stem the rush of protection filings
(by Dr.Goldfinger)
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New banktruptcy law, expected to be passed by Congress next week, can be a hurdle to the crowds of consumers that try to resolve their credit-card issues with the banktruptcy protection filings.
The growing number of people that file for either Chapter 7 or Chapter 13 banktruptcy protection caused a dramatic turn in the credit-card industry while the problem remains to be the borrowers’s, not the industry’s, the Wall Street Journal says.
If passed, this will be the biggest change for the bankruptcy legislation in the US since 1978. Some bill opponents say that the law would double the press on the consumers.
Under the new legislation, debtors will have to receive credit counseling and will not get bankruptcy filing so easily. The bankruptcy court, therefore, will have to apply strict tests to the people that file for protection to be sure they are really in progress of repaying the debt.
The law is widely expected to push more people to poverty, some analysts say. Forced to spend less, people will depress the economy that is just keeping pace to recovery.
American families caused the peak in borrowings during the past four years. Americans currently owe $2.12 trillion to the lenders, 110% more than they did a decade ago, according to the Federal Reserve Board.
The pace of borrowings is not faster than the pace of bankruptcy filings. 1.59 million people filed for personal bankruptcy protection last year. It is 780,000 higher than a decade earlier. That means the question whether the «credit-card nation» will manage to survive under the new legislation remains open.
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