Information About Bankruptcy
Sometimes referred to as a “fresh start,” bankruptcy allows people with overwhelming debt to start over without being harassed by creditors. Bankruptcy originated in Italy and was designed to favor the creditor. Early bankruptcies forced debtors to sell their property to pay creditors and the debtor still owed the balance of the debts or were thrown in prison if they could not pay.
Fortunately, bankruptcy in the United States was not based on the Italian system. Throughout the 1800s, various forms of bankruptcy laws were passed, but each one only lasted a few years. The Bankruptcy Act of 1898 was the first bankruptcy law passed in the United States that was not quickly repealed. It was also the first to focus on getting help for the debtor.
Article I, Section 8 of the United States Constitution authorizes Congress to enact uniform laws on the subject of bankruptcies and in 1978, congress enacted the “Bankruptcy Code.” The code is title 11 of the United States Code and has been amended several times since its enactment. None of these amendments were as major as the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) that went into effect in 2005. It was introduced by credt card companies and banks who thought that the old law was too lenient for debtors. The BAPCPA assumed that many filers could actually afford to pay back some of their debts and was promoted as a method to cut down on chapter 7 bankruptcy. As you can imagine, cutting down on chapter 7 and making debtors pay some of their debts doesn’t really protect consumers as much as it protects creditors. So far, the BAPCPA has mostly meant nothing more than additional paperwork and hassle for bankruptcy lawyers and those filing bankruptcy. Those who have wanted to file chapter 7 under the BAPCPA have usually been able to.
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