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Bankruptcy filings are down, but that doesn’t mean people shouldn’t be filing
After years of urging by major credit card companies, Congress made sweeping changes to Federal bankruptcy law in 2005. The Bankruptcy Abuse and Consumer Protection Act, a bill that does anything but protect consumers, went into effect in October 2005 and made it harder than ever for consumers with problem debt to have their obligations wiped out by the courts. Many of the changes in the law were simply designed to increase fees and paperwork; there was little of substance in the bill that provided any real help to indebted consumers. The overall result was confusion and a mad rush to file before the new law took effect.
Now, the Administrative Office of the U.S. Courts, says that the number of filings in the first half of 2006 represent a drop of 9.3% from last year, and takes the number of overall filings to their lowest levels in five years. Advocates of the new law say that this is conclusive proof that the new law is working. The law does require credit counseling; perhaps the counseling is providing incentive to pay off bills, they say.
While it may be wishful thinking, it simply isn’t the case. So many people have filed for credit counseling that the most many agencies can do for their clients is offer them a group counseling session or one conducted over the Internet. This is hardly the sort of help that will allow a consumer with, say, $50,000 worth of credit card debt to avoid filing for bankruptcy.
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