Do Bankruptcy Laws Unjustly Favor Lenders?

In: Business and Management

Submitted By spiris
Words 1064
Pages 5
Do Bankruptcy Laws unjustly favor Lenders?
Intro
Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. Bankruptcy law provides for the development of a plan that allows a debtor to resolve his debts through the division of his assets among his creditors.

Although the goal of the modern bankruptcy is to allow the debtor to have a “fresh start,” and to be granted relief of some liability, there haven’t been any regulators to protect consumers or debtors since the first Bankruptcy Law that the Congress passed in 1797 which lead to imprisonment of thousands of debtors. And it wasn’t till 1841 that the debtor could voluntarily go into bankruptcy and so avail himself of this privilege of discharge. The Federal Bankruptcy Act of 1898 had 3 principal objects in view: 1. To prevent preferences and ensure equality in payment as between the creditors of insolvent debtors; 2. To punish and discourage commercial fraud; and 3. To discharge honest debtors from their debts when overwhelmed by financial misfortune through no fault of their own. The act gave creditors collectively full power over the administration of insolvent estates and placed upon them the responsibility for enforcement of the act. New Legislation The new Legislation enacted by Congress called the Bankruptcy Abuse and Consumer Protection Act was intended to make it more difficult for debtors to file a Chapter 7 Bankruptcy under which most debts are forgiven or discharged and instead force debtors to file a Chapter 13 Bankruptcy under which debts are discharged only after the debtor has repaid some portion of these debts.
Herbert Addison reports, On October 17, 2005 President Bush’s bankruptcy reform law goes into effect forever changing the rules of debt collection in this nation. Consumer advocates and the public appear to be…...

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