On October 17, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 takes effect for all Americans.
The new law is an attempt to establish a clear requirement that debtors should repay their debts. That mandate is absent from current law, which instead focuses on helping overwhelmed debtors get a fresh start.
Some wonder how the new law will affect victims of Hurricane Katrina. "People who are seriously affected by this hurricane are not going to be able to file bankruptcy by October 17," said Henry Sommer, "They have more pressing things in their lives, like survival."
The chairman of the U.S. House Judiciary Committee said on Tuesday he had no intention of reopening the sweeping bankruptcy law passed by Congress for victims of the hurricane.
President Bush had this to say, "This Act makes common-sense reforms to our bankruptcy laws for American citizens. By restoring integrity to the bankruptcy process, this law will make our financial system stronger and better. By making the system fairer for creditors, we will ensure that more Americans can get access to affordable credit. Under the new law, citizens who have the ability to pay will be required to pay back at least a portion of their debts. This law is needed to crack down on abuse of the bankruptcy system."
In other, completely unrelated, news, Delta Airlines and Northwest Airlines followed United Airlines and US Airways into bankruptcy. United, the No. 2 airline, has been in bankruptcy court for almost three years. US Airways has been in bankruptcy court twice since the Sept. 11 terrorist attacks that shook the airline industry. With those four major airlines and some smaller ones already in bankruptcy, nearly half of the industry's capacity is on carriers operating under bankruptcy court oversight. The latest bankruptcies, which had been widely anticipated, could put added pressure on other carriers including industry leader AMR Corp., parent of American Airlines, by putting them at a competitive disadvantage as their bankrupt rivals shed costs and ditch pensions, analysts said.
Bush states, "Bankruptcy should always be a last resort in our legal system. If someone does not pay his or her debts, the rest of society ends up paying them. In recent years, too many American citizens have abused the bankruptcy laws. They've walked away from debts even when they had the ability to repay them."