Academic journal article ABA Banking Journal

Next Chapter in Bankruptcy Saga Awaits New Congress

Academic journal article ABA Banking Journal

Next Chapter in Bankruptcy Saga Awaits New Congress

Article excerpt

Next chapter in bankruptcy saga awaits new Congress

Capitalism without bankruptcy, said former astronaut Frank Borman, is like Christianity without hell. The problem is, more people seem willing to risk the fires of Hades these days.

The stigma of bankruptcy has not just lost its sting--it's almost fashionable for increasing numbers of consumers and businesses. Blame it on the economy, the global recession, the 1980s, aggressive lawyers--the result is that creditors have been left behind to clean up after the party.

And while some consumer education efforts have helped, it has always been pretty clear that additional steps would be needed--specifically, action by Congress, which after all gave us the bankruptcy laws in the first place. Needed reforms. Given the steady rise of bankruptcy filings-consumer filings have nearly tripled since the mid1980s, to a million this year--it's no wonder that ABA has made bankruptcy reform a top priority. ABA organized a broad coalition of lender groups who sought a comprehensive solution to the problem of consumer bankruptcies in the 102nd Congress.

The combined effort nearly won the day, despite being considered a long shot in an election year. But reform succumbed in the waning hours of Congress, brought down by a determined, but unrelated, Senate filibuster and just plain lack of time.

What would a good bankruptcy bill have done? ABA sought a bill that would bring greater consistency to consumer bankruptcy law, speed up a creditor's recovery of losses, and head off ongoing consumer abuse of the code. ABA and its allies, who formed the National Consumer Bankruptcy Coalition, also sought to preserve the basic rights of consumers who genuinely need bankruptcy protection. …

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