Obama Calls For Bankruptcy Law Reform

Obama Calls For Bankruptcy Law Reform
Democratic presidential candidate Barack Obama wants to implement reforms to bankruptcy law in order to make the process smoother for military families and disaster victims, and to help homeowners filing for bankruptcy keep their homes.

"I'll reform our bankruptcy laws to give Americans who find themselves trapped in debt a second chance," the Illinois senator told a crowd of 2,700 in Powder Springs, Georgia.

"While Americans should pay what they owe and we should be fair to those creditors who were fair to their borrowers, we also have to do more for the struggling families who need help the most," Obama added.

"[I]nstead of standing up to the big banks and credit card companies to strengthen our safety net, Washington has been helping them shred it. For too long, our bankruptcy laws have protected big banks and credit card companies instead of struggling families."

Obama's proposed reforms included a "fast track" process for service members and their families who have declared bankruptcy, exempting them from the "means test" instituted as part of the harsh new bankruptcy laws passed in 2005.

Under current law, anyone filing for Chapter 7 bankruptcy must undergo a "means test" to determine their actual income levels and expenses for qualification, regardless of circumstances. Those who did not qualify for Chapter 7 bankruptcy under the means test would be shifted to Chapter 13, where they would have to arrange a repayment plan of their debts with their creditors.

Obama said the "fast track" process would also eliminate "unnecessary paperwork" and the mandatory credit counseling requirement passed as part of the new laws.

The candidate also said that seniors filing for bankruptcy would get a minimum federal homestead exemption that would give them a better chance to keep their homes, and would streamline the filing process for victims of a natural disaster.

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July 8, 2008
By Martin H. Bosworth
ConsumerAffairs.com