Under the previous bankruptcy system, filing brings immediate protection
from collection activity, lawsuits, foreclosure, and eviction. This is known as
an automatic stay. Under the new law, this protection is no longer absolute.
For example, in cases where a judgment has already been secured, you can still
be sued and even evicted while your bankruptcy case is being heard.
The Pros
Supporters of the new law believe that it will close the loopholes and
incentives that have previously allowed individuals to escape debts they simply
do not want to repay. They say the system was being abused and defrauded by
gamblers, impulse shoppers, and divorcees, and was easily used by the wealthy
to shelter their money from creditors. The law encourages people to accept
responsibility for the debt they have built, and to find other ways to deal
with it so they can pay back the money they owe. It also still provides a
framework for those who truly need a fresh start.
The Cons
Opponents contend that the new law, especially the means test and attorney
liability, place too much of a burden on poor and middle class Americans. Some
argue that a large percentage of people who file bankruptcy do so because of
unemployment and health crises, not because they were irresponsible or trying
to commit fraud. They point out that the language in the law actually states
that the courts will assume that a filing is "abusive" until the
debtor proves otherwise. Much criticism has also noted that the law does little
to curtail the lax lending policies of credit card companies. These companies
have contributed to the escalating debt problem in this country by giving
credit to individuals who obviously cannot afford it, as well as by deceptive
advertising and hidden fees and policies.