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WASHINGTON - President Bush signed a bill Wednesday that will make it harder for debt-ridden people to wipe clean their financial slates by declaring bankruptcy.

The legislation was strongly opposed by consumer rights activists who said it would prevent vulnerable Americans from getting the fresh start they need. But Bush said the law was “restoring integrity to the bankruptcy process.” …

Take control of your credit and Debt is even more important know that Bush has signed this into law.

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With passage of the Bankruptcy Abuse Prevention and Consumer Protection Act virtually assured, many experts believe financially-strapped consumers will rush to their local bankruptcy court to file before the bill becomes law. This raises the question: Is bankruptcy right for you if you’re struggling to make ends meet each month?

(PRWEB) March 11, 2005 — With passage of the Bankruptcy Abuse Prevention and Consumer Protection Act virtually assured, many experts believe financially-strapped consumers will rush to their local bankruptcy court to file before the bill becomes law. This raises the question: Is bankruptcy right for you if you’re struggling to make ends meet each month?

The answer, according to consumer advocate Paula Langguth Ryan, isn’t always clear cut. In fact, depending on how old your debts are, your payment history and your personal situation, bankruptcy may actually hurt you more than doing nothing.

“If you haven’t paid anything on your outstanding debts in four or five years, and there’s no chance you’re going to be able to pay anything on them in the next few years,” says Ryan, “you’ll have a clean slate in two to three years when those debts fall off your credit report.”

Compare that to having a bankruptcy listed on your credit report for another 10 years and bankruptcy doesn’t look like your best option, unless you need to get a car or move before the old debts hit the seven year mark and are removed from your credit reports.

Ryan, who wrote the best-selling Bounce Back From Bankruptcy after having gone bankrupt herself at an early age, believes many people wait too long to declare bankruptcy until they’ve literally given away everything to creditors. At her debt-busting workshops, she shares horror stories, such as the one about a man who was arrested after robbing seven banks. His family had a fire in their apartment and had relocated to a hotel for seven months. With most of their income going to pay creditors, he robbed a bank every month, demanding only enough to pay his monthly hotel bill.

Another family of five, says Ryan, was paying their creditors so much money each month they only had $50 left for food. “After one child died from malnourishment. Social Services put the other two children in foster care and threw the parents in jail for child neglect.”

Ryan offers these warning signs that it may be time to declare bankruptcy:
• You’ve cut back on every essential and paying your creditors causes you to fall behind on your essential payments, such as your mortgage/rent, car payment, insurance or utilities.
• You are losing sleep, constantly arguing with your spouse, considering divorce or contemplating suicide because of financial pressures.
• You are considering doing something illegal, or thinking of pursuing shady credit repair strategies, in order to relieve the pressure of dealing with your creditors.
• You are jeopardizing your family’s health, nourishment or home in order to pay creditors.

Anyone who identifies with one of these warning signs, says Ryan, should schedule a free consultation with a bankruptcy attorney and explore their options.

“It’s called the Bankruptcy Protection Act for a reason: to give people a fresh start, to help you get a clean slate,” reminds Ryan.

If bankruptcy is your best option, Ryan warns against immediately jumping at new credit offers, as so many people do. Your best strategy? Avoid getting any new credit for one year, says Ryan, who offers bankrupt consumers a free tip sheet on the Do’s and Don’ts of Bouncing Back from Bankruptcy at her website, www.newcreditafterbankruptcy.com

“It takes more than becoming debt free to break the debt cycle. You have to change the attitudes and habits that got you into debt in the first place,” says Ryan. “Consumers who do that have a much better chance of having a secure financial future.”

By MARCY GORDON, AP Business Writer

WASHINGTON - Erasing medical bills, credit card charges and other debts in bankruptcy soon will become more difficult under landmark legislation that has vaulted its last major hurdle before Senate passage.

The legislation gliding toward congressional passage following Tuesday’s procedural vote in the Senate would constitute the most sweeping overhaul of U.S. bankruptcy laws in a quarter-century.

Senate passage this week and likely House approval of that bill next month would deliver to President Bush (news - web sites) the second of his pro-business legislative priorities after Republicans fattened their majorities in both chambers in November’s elections.

Congress sent Bush a law last month placing most large multistate class action lawsuits under federal court jurisdiction, making it harder for plaintiffs to join together and win multimillion-dollar judgments in state courts.

Banks, credit card issuers and retailers have pushed for eight years for bankruptcy revisions that would force more people to repay at least part of their debt. It nearly passed in 2002 — failing when the Senate accepted, but House Republicans rejected, a Democratic amendment barring protesters from using bankruptcy to avoid paying court fines for blocking abortion clinics.

This year, with four more Republican senators, the abortion provision was rejected Tuesday on a 53-46 vote. Later the Senate voted 69-31 to limit further amendments, close the debate and hold a final vote this week.

The bill would set up a new test for measuring a debtor’s ability to pay.

Those with insufficient assets or income could still file a Chapter 7 bankruptcy, which if approved by a judge erases debts entirely after certain assets are forfeited. But those with income above the state’s median income who can pay at least $6,000 over five years — $100 a month — would be forced into Chapter 13, where a judge would then order a repayment plan.

Critics say that’s unfair because many people who file for bankruptcy have lost their jobs, or are going to lose them.

According to current law, a bankruptcy judge determines under which chapter of the bankruptcy code a person falls — whether they have to repay some or all of their debt.

Sensing a long-elusive victory at hand, Republican backers exulted Tuesday and urged colleagues to move speedily through remaining Senate deliberations.

“The sooner we finish work in the Senate and get the bill to the House, the sooner our bankruptcy system will be focused as it should be on helping those with real need, and less vulnerable to abuse by consumers who have the ability to repay their debts,” said Sen. Charles Grassley (news, bio, voting record), R-Iowa, the bill’s primary author.

The bill’s supporters argued that bankruptcy frequently is the last refuge of gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires, often celebrities, who buy mansions in states with liberal homestead exemptions to shelter assets from creditors.

Opponents, too, have a litany of stories. Sen. Edward M. Kennedy (news, bio, voting record), D-Mass., speaks of Zoraya Marrero, a single mother with three children from Woodbridge, Va., the eldest of whom has spina bifida. Having had to return $60,000 in state disability benefits and medical coverage for the child, and paying medical expenses, Marrero recently filed for bankruptcy.

Most applicants “did not seek bankruptcy relief willingly,” Kennedy says. “Millions of … Americans in similar situations have filed for bankruptcy only after exhausting all other options.”

A recent Harvard University study found that costly illnesses led to about half of all personal bankruptcies and that most people who file for bankruptcy protection because of medical problems have health insurance.

Consumer and civil rights groups and unions say the legislation is unfair to low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face mounting medical bills. They say it would turn the bankruptcy courts into collection agencies for the credit card companies.