President Bush on Wednesday signed legislation rewriting the nation's bankruptcy law. The new law, opposed by consumer rights groups, makes it harder for debt-ridden consumers to wipe that debt out by declaring bankruptcy.
In a statement given at the signing, President Bush called the legislation a âcommon-sense reforms to our bankruptcy laws.â
According to the Associated Press (AP), the new law, which becomes effective in six months, requires individuals earning more than the median income for their state, to work out repayment plans for medical bills, credit card debt and other obligations rather than erasing them through bankruptcy.
âOur bankruptcy laws are an important part of the safety net of America. They give those who cannot pay their debts a fresh start. Yet bankruptcy should always remain a last resort in our legal system. If someone does not pay pay his or her debts, the rest of society ends up paying them. In recent years, too many people have abused the bankruptcy laws. They've walked away from debts even when they had the ability to pay them,â President Bush said at the signing.
The rising number of bankruptcies has been often been cited as a reason for reforming the bankruptcy laws. Despite this, the AP found that new personal bankruptcies actually fell from 1,613,097 to 1,599,986 in the year ending June 30, 2004.
The American Bankruptcy Institute told the AP that the new law will disqualify between four and 20 percent, or between 30,000 and 210,000 individuals, from dissolving their debt through bankruptcy.
âAmerica is a nation of personal responsibility where people are expected to meet their obligations. We're also a nation of fairness and compassion where those who need it most are afforded a fresh start. The act of Congress I sign today will protect those who legitimately need help, stop those who commit fraud, and bring greater stability and fairness to our financial system.â President Bush concluded prior to signing the bill.