A look at personal bankruptcy reform 10 years on

As Mississippi and the rest of the country continues to work its way through a struggling economy, many local residents have either filed for bankruptcy or at least considered it. In many ways personal bankruptcy is a huge step for any individual, but it is often the only way to truly obtain a fresh financial start.

Ten years ago, Congress passed the Bankruptcy Abuse and Consumer Protection Act. The Act was designed to prevent abuse of the U.S. bankruptcy system during a time of relative prosperity. One might expect that, during and after the recession, bankruptcy filings would spike as debtors looked for means of debt relief. However, the number of individual bankruptcy filings has actually gone down since 2005. A decade ago that number was at around 1.7 million; last year, the figure went down to 920,000.

One of the main elements of the reform was the "means test" that many who have visited a bankruptcy attorney have likely learned about. The test is meant to guide those with more significant incomes into repayment plans without harming those with special circumstances. Another element is the requirement that those filing for bankruptcy take credit counseling prior to filing. The U.S. Department of Justice notes that there are about 140 government-approved non-profits offering counseling before a bankruptcy, with another 220 non-profit organizations able to provide legitimate counseling during a bankruptcy.

The credit counseling element of bankruptcy reform reflects the fact that the right information can make all the difference when it comes to individual bankruptcy. A Southaven bankruptcy attorney can be an initial stop for anyone looking to take advantage of the benefits of Chapter 7 or Chapter 13.

Source: American Banker, "Bankruptcy reform worked, but didn't go far enough," John McMickle, Oct. 16, 2015

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