Magazine article Black Enterprise

Bankruptcy Law Gets Tough on Debtors: Latest Legislation Seeks Big Payback for Creditors

Magazine article Black Enterprise

Bankruptcy Law Gets Tough on Debtors: Latest Legislation Seeks Big Payback for Creditors

Article excerpt

For decades, declaring bankruptcy has been a last-resort measure to re-establish financial standing for economically distressed individuals and families. Now, a new, controversial law--the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005--will make it harder to seek protection under Chapter 7 of the bankruptcy code, which eventually erases most unsecured debt after a surrender of some resources. Most provisions of the bill, which was signed into law by the president April 19, will take effect Oct. 17.

Critics of the legislation say the provisions are one-sided in favor of corporations' bottom lines and will likely punish those struggling most to get out of debt. These would include the elderly; individuals rocked by job loss, divorce, or medical expenses; and moderate and low-income families, composed largely of African Americans and other people of color.

"The Congress members of both parties who are embracing these punitive measures for working families are dangerously out of touch with the grim economic realities faced by ordinary families," says Tamara Draut, director of the Economic Opportunity Program of New York-based think tank Demos.

"African Americans have higher levels of debt," maintains Rep. Stephanie Tubbs Jones (D-Ohio), citing statistics that the average African American family's debt is roughly 30% of its assets, compared to 11% for a white family. "African Americans and Hispanics are much more likely to go bankrupt." Data from the Drum Major Institute for Public Policy, a nonpartisan, nonprofit organization dedicated to progressive social and economic change, indicates that blacks are five times more likely than whites to file for bankruptcy. …

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