Jackson Free Press

There's a rush of filings this week as the bankruptcy laws get considerably harsher next Monday, thanks to legislation passed last spring. The bill makes it more difficult for individuals to file for Chapter 7 bankrupcy, the type that eliminates many unsecured debts. That includes people with significant credit card debt as well as those who have extraordinary expenses from medical bills.

The law, which President Bush signed in April, will make it more difficult for individuals to file for Chapter 7 bankruptcy, which eliminates most debts. Individuals whose income exceeds their state's median may be required to file under Chapter 13, which requires debtors to repay their creditors under a schedule established by the courts. Consumers who are still eligible for Chapter 7 will be required to undergo credit counseling and will pay more to file.

At the same time, a lesser known issue facing American debtors is a rule change by the Treasury Department that will increase credit card minimums for the majority of Americans by the beginning of 2006. In some cases, that'll nearly double credit card payments for those who pay the minimums.

Lisa Moore of Sacramento, who has $28,000 in debt on six credit cards, said so far only one of her lenders had sent a letter warning about a rise in the minimum payment. That card, which has a $6,500 balance, will require a $280 minimum payment starting next month, up from $180, she said.
The new rules will hit cardholders with the worst credit the hardest, as the rule is based on paying down a portion of your principal each month in addition to the interest accured in that month. For people who have interest rates on their credit cards in the high 20s, the minimum payments could increase easily by 75% or more.

Previous Comments

ID

103188

Comment

Sad sad sad, people are rushing to file bankruptcy over piddly amounts some as low as 20,000. People don't realize the still have to pay some of it back. Paul Ramsey is going to crap his pants.

Author

*SuperStar*

Date

2005-10-14T11:46:11-06:00

ID

103189

Comment

The 'reforms' to bankruptcy laws epitomize everything that is wrong with our country. This was the first bill this Congress passed, despite the fact that only 10% of the population supported the change. When you look at the fact that over half of people who file have overwhelming medical debt, it becomes obvious just how broken our system is. A friend of mine had complications during her pregnancy and had to be bedridden, so she put everything on her credit cards and declared bankruptcy. She has a beautiful little girl and the bankruptcy law let her start over. But in our endlessly corrupt society, we do not pass laws providing for the pregnant woman. We pass laws protecting the super-rich banks. Where's the free market? If credit card companies are making bad loans (and clearly they are) then they deserve to lose the money.

Author

Brian C Johnson

Date

2005-10-14T19:51:07-06:00