Without health insurance, a catastrophic illness such as cancer can bankrupt an individual. Even for many individuals with health insurance, the combination of premiums and deductibles can be financially devastating. The elderly and families headed by a solitary woman are disproportionately affected. It is terrifying to consider how near many Americans are to foreclosure, bankruptcy, or financial ruin.
Either the loss of a job or divorce is the second most common cause of personal bankruptcy. The sudden loss of an employment due to company layoffs, company outsourcing, or a company going out of business can easily devastate the financial situation of a heavily indebted household that lives essentially paycheck to paycheck. Divorce can result in having to provide for two households instead of one, as well as possible alimony payments.
The new bankruptcy law, which went into effect in October 2005, was written primarily by credit card companies. As you might anticipate, they altered the law in their favor and included virtually no protections for citizens who may have fallen into the aforementioned categories.
According to the new bankruptcy law, the more equity you have in your home, the more likely it is that you'll have to use it to pay off your creditors, thereby increasing the likelihood that you'll lose it through foreclosure. The new adjustments to the law increase the cost of filing for bankruptcy, making it more difficult for those who truly need it to do so. In addition, the new law will require the debtor to enter into a repayment plan as opposed to erasing certain debts, as was the case under the previous bankruptcy measure.
Other fees increase the cost of registering for bankruptcy. Before and after registering for bankruptcy, you will be required to pay for financial counseling sessions. Additionally, the bankruptcy laws are more complex, so your attorney fees will be higher.
The prior bankruptcy laws were based on the belief that a person who had worked his entire life, paid his bills on time, and was generally a good citizen should have the opportunity to wipe the financial slate clean and start over if he was unable to pay his bills due to unforeseen circumstances. Certain individuals took advantage of the system, but in a legal society, this is inevitable.
And, yes, the old bankruptcy laws undoubtedly required some revisions, as some provisions were antiquated and out of date. However, implementing changes should not entail eliminating people's safety net. The debt situation that many of these individuals found themselves in was undoubtedly exacerbated by the outrageous late fees, percentage increases, and other ""profit centers"" built into the lending practices of the majority of the major credit card companies.
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