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| Bankruptcy law does have supporters |
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"When a customer wipes out
the two or three hundred dollars, that isn't going to hurt the local
retailer. But if tens of thousands or even if millions of people
are doing it, that adds up," she says.
Jeanne Delgado, vice president of property management
for the National Multi Housing Council in Washington, D.C., says
that the eviction of a resident for lawful reasons, such as failure
to pay rent, illegal drug use or property destruction, is a time-consuming
and expensive process when you consider court fees, lost rent and
utility costs. She says prior to the reforms, the automatic-stay
provision in the law, which stops collection efforts, created problems.
"While the automatic-stay provision applied to
all creditors, it imposes more hardship on apartment owners because
while the stay is in effect, not only can the owner not seek back
rent, but they must continue to, in a sense, grant credit in the
form of free housing, something credit card companies or retailers
are not required to do."
Steve Bartlett, president and CEO of The Financial
Services Roundtable, a trade association of consumer credit and
finance companies, says abusive bankruptcy filings have negatively
affected responsible consumers.
"It has been estimated that, before bankruptcy reform, every
U.S. household paid, on average, a hidden $400 annual 'tax' for
abusive bankruptcy filings."
That estimated "tax" has been cited by congressmen
and lobbyists repeatedly in congressional records. However, opponents
of the law have referred to the "bankruptcy tax" as a
myth and say there is no evidence to support the number.
Combating abuse
Financial organizations and researchers have listed 10 ways they
believe the bankruptcy law combats consumer fraud:
- A petitioner's lawyer must agree to review all
financial claims and must sign off on the accuracy of the claims.
Lawyers and petitioners can be penalized for fraud.
- Petitioners must file copies of their recent tax
forms. This filing eliminates falsification of income and rids
the bankruptcy system of criminals and other persons who don't
file income tax returns.
- The U.S. Trustee program, which regulates bankruptcy
laws, will contract with a third party to conduct audits for at
least one out of every 250 bankruptcy filings in each federal
judicial district.
- Mandatory bankruptcy
credit counseling before filing provides debtors with alternatives
to bankruptcy. It's designed to deal with "bad-apple debtors'
attorneys" and "bankruptcy mills" that push people
into bankruptcy without telling consumers all their options. The
required counseling after a debtor files is intended to cut down
on repeat filers. In addition, the counseling provision adds an
additional paper trail for fraud investigators.
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