"The lion's share of people who file for bankruptcy are genuinely in need of protection. But in some cases, there are individuals who have the wherewithal to pay, and choose instead to abuse the system," said Sen. Tom Carper, D-Del. "That means it's the rest of us who pay for them."
For banks and credit card companies, the measure could mean millions of dollars in recovered assets. But critics worry that the broadly worded bill would punish not just deadbeat debtors, but families pushed into bankruptcy through no fault of their own.
Personal bankruptcy filings have doubled in the past decade, to more than 1.6 million cases last year. The bill now under debate would require tens of thousands of people who seek bankruptcy protection to repay at least part of what they owe and make it harder for them to wipe away their debts.
Supporters say the bankruptcy system has been abused by people looking for a quick fix for their financial woes.
Opponents say the bill will do little but increase consumers' misery without closing the bankruptcy loopholes available to corporations and wealthy debtors.
Q1- Chapter 7: Designed for people who fall so deeply into debt they have no hope of repaying what they owe. Debtors turn over a portion of their assets and in return, their debt is wiped away. The bankruptcy bill would tighten the standards for this category, and sweep an estimated 30,000 to 100,000 people a year into Chapter 13 bankruptcy instead. Chapter 13: Debtors are put on a stringent repayment schedule; their wages are garnished for years, in an effort to repay as many creditors as possible.
Chapter 7 Bankruptcy is the most common type of bankruptcy proceeding. It is a liquidation type of proceeding (as opposed to a reorganization proceeding). What...