Bankruptcy - Are the credit card companies getting anything out of it?

With the new, oddly named, Bankruptcy Abuse and Consumer Protection having become law in 2005, consumers with financial woes are still struggling to find a solution. The entire legal industry is more or less in a state of chaos as contacts from would-be applicants are coming in all time high number due to confusion over the new debt relief law. Debt relief cases are piling up, the lawyers are tired and overworked, and those consumers who can find an attorney to take their case are realizing that many attorneys have dramatically increased their fees. A lot people don't know if they can even file these days, and lawyers are completely swamped with calls from uncertain debtors.

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The new debt relief law was approved after years of high-pressure lobbying by financial institutions. Lenders and creditors have alleged for many years that consumers are recklessly accumulating large financial obligations that they don't plan to repay, only to have those financial obligations forgiven by the bankruptcy court under previous bankruptcy law, which was viewed by lenders and creditors as too lenient. The lending industry demanded, and received, a much tougher debt relief law so that they may retrieve more of the cash they are owed.

Past cases that were resolved under Chapter 7 of the bankruptcy code, which allowed debt to be discharged, will now be determined under Chapter 13, which requires a repayment schedule. It will now be harder than ever for the average consumer to have her financial obligations wiped clean by the courts by means of personal bankruptcy. Washington gave the financial industry everything it asked for in the modified statute. According to financial institutions, those people who run up unimportant debts will now be forced to repay them, thus saving the lending industry billions of dollars and we assume that they will offer those savings to customers in the form of reduced prices, fees, and rates of interest.
 

Will the new law actually put more money into the hands of financial institutions? What small amount of money the financial institutions will see now might arrive over several years, and may not even represent the full sum. Despite the arguments put forth by lenders, many, if not most people don't file on a whim; they do so due to the fact that they've lost their jobs, had a bad illness or have had some other disaster come their way, such as what occurred to the victims of Hurricane Katrina. Simply making it a law that the people with debt problems need to pay in full will not give them the ability to do so, and repayment plan or not, these debtors may not be able to repay if they simply do not have the cash. Many, if not most debtors who file have already reached a point where they just cannot pay their bills.

The end result of this new legislation will simply be more inconvenience for everyone else. In all likelihood, creditors will see no more cash than they did previously.