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Lawyers group slams new federal bankruptcy law

[JURIST] The National Association of Consumer Bankruptcy Attorneys (NACBA) [group website] released [news release] a report [text, PDF] on Wednesday that criticizes the new federal bankruptcy law [JURIST report] enacted in October 2005, saying the new law does little to stop abuses of the bankruptcy system and has just placed unnecessary hurdles in front of people with legitimate reasons to file for bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 [text, PDF] raises the bar for filing bankruptcy by requiring credit counseling and mandating above-average earners to file under the restrictive Chapter 13 [text]. Congress enacted the law in an attempt to curb abuses by gamblers, compulsive shoppers and multi-millionaires.

According to Brad Botes, executive director of the NACBA, 79 percent of potential filers were victims of job loss, catastrophe, or medical problems. Botes attacked the new law [statement, PDF], saying:

If Congress had gotten bankruptcy reform right, the changes they made would be exposing most would-be filers as deadbeats. Instead, credit card counseling organizations are finding that the vast majority of people were pushed to the brink of financial collapse by circumstances over which they had no control. ... The federal bankruptcy law changes...are doing no measurable good whatsoever. They have done nothing more than put new hurdles in the path of people who are already flat on their back.
The report, containing data from six credit counseling firms across the United States, also claims that 97 percent of the 61,335 consumers studied are unable to repay their debt and did not benefit from credit counseling. AP has more.

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