Praise for the Bankruptcy Reform Act of 2005

Supporters of the new federal Bankruptcy Reform Act claim tougher regulations apply only to individuals who earn more than the median income within their state of residence. Supporters further claim that all low-income families remain free to declare bankruptcies upon fair and just terms. As a return to prudent sensibilities, according to the American Bankers Association, the bill continues to allow individual access to the courthouse for the purpose of holding them accountable for all debts, and eliminates the potential for abuse.

According to a consensus among conservative Senators, bankruptcy is transformed into a sensible program designed to protect the best interest of creditors. Because of restored credibility, debtors will no longer be able to escape legal debts by claiming hardship.

Criticism of the Bankruptcy Reform Act of 2005

According to public-minded Senators, the new law, as passed, imposes a seemingly criminal standard of living upon debtors for a period of up to 5 years in Chapter 13 plans. The fact that most filings are the result of unforeseeable circumstances which cause great economic devastation, the law makes little sense when punishing average citizens who fall prey to job instability, escalating hospital bills, and family crisis. The effect will be to destroy motivation and personal financial growth for 5 years, costing billions in lost tax revenues. This cost will be passed along to all taxpayers, while large creditors gain little in additional recoveries.