The Bankruptcy Reform and Relief Act of 2005
The Bankruptcy Reform and Relief Act of 2005 is a law passed by Congress and signed into law by President Bush in April, 2005. Put into effect midnight, October 16, 2005. Interestingly enough, the law had been presented numerous times before and vetoed by President Clinton and the law didn’t get passed until after the credit card industry donated $455 million in campaign donations to Congress over the eight years prior to its passage.
The new laws purpose was to reduce the amount of bankruptcy filings and the supposed fraud in the system. It requires clients to bring larger quantities of documentation to their lawyers and for them to review. It also requires all debtors to attend a credit counseling session before filing bankruptcy. It made various alterations in the law, which those familiar with the law, can easily identify as special interest legislation tailored to the groups lobbying for a variety of components in the new law and includes circumstances that never really happen in any bankruptcy practice. There were many other changes as well, but I won’t list all of them here one by one.
However, those familiar with the system, from the bankruptcy judges, the bankruptcy trustees, the lawyers representing both creditors and debtors, as well as numerous esteemed law professors who’ve studied the causes and effects and patterns of bankruptcy filings, seemed to agree the problems of the Act was what it was designed to fix weren’t real and the system wasn’t really broken. Rather, it was more a function of the need for Congress to actually deliver something to the credit card and creditor industry in exchange for the $455 million in campaign contributions it received.
I’ve read many articles and went to more than eleven seminars in various parts of the country in the last year-and-a-half to learn about the new bankruptcy law. It’s basically agreed that it was mostly an unnecessary change in the bankruptcy law and terribly written. One speaker said that its grammar was so poor, that the drafters of the law obviously needed their sixth grade English teacher there to help them. Nevertheless, we are left with its confusing structure, unnecessary requirements, vague language, and hanging clauses referring to nothing.
The problem for the client and the bankruptcy attorneys is that all of the sloppy language, new ideas, and misplaced modifiers are interpreted by the bankruptcy courts. Where there are two ways to interpret a new sentence in the bankruptcy law, creditors and debtors may disagree. It’s inevitable that judges interpreting the disagreement have their own partiality when they decide disputes. It may take years to clean up the law so that a bankruptcy lawyer could tell you “what it really means”.
That sounds like an excuse, but it is true; there are things in this new bankruptcy law that no one really knows the meaning and until the Supreme Court of the U.S determines what they mean after the different states and parts of the country come up with different interpretations no one will know for years what they mean “for sure”.
However, the good news is that most of the bankruptcy code didn’t change nor did the state law which we fill in the holes of the bankruptcy code. The information in this website gives an idea of the procedures established by the new law, as I understand the it to be….until someone tells me otherwise.
