STATEMENT OF TRAVIS B. PLUNKETT, LEGISLATIVE DIRECTOR OF THE CONSUMER FEDERATION OF AMERICA, ON THE NEW BANKRUPTCY LAW
FOR IMMEDIATE RELEASE
April 20, 2005
Travis Plunkett, 202-387-6121
Jack Gillis, 202-737-0766
The Consumer Federation of America has long opposed bankruptcy legislation being signed into law today for a very simple reason. It will harm families hit by genuine financial misfortune. The American tradition of bankruptcy has always allowed families confronted with crushing debts to get back on their feet again and become productive members of society. This laudable tradition is being pushed aside by this punitive legislation. The new bankruptcy law will likely keep many Americans who need a fresh financial start in bankruptcy from receiving it. They will be stuck in a debtor's prison without walls.
The creditors who convinced Congress to pass this bill have claimed that it simply targets the relatively small number of affluent individuals who abuse the bankruptcy system. Nothing could be further from the truth. As bankruptcy judges, trustees and scholars have pointed out, this 500-page overhaul of the bankruptcy code erects dozens of barriers that will make it more difficult for all individuals - including moderate income debtors declaring bankruptcy because of the loss of a job, high medical bills or divorce - to receive a fresh financial start.
The big winners under the new law will be the special interests that literally wrote it, particularly the credit card industry. This is particularly ironic because reckless and abusive lending practices by credit card companies have driven many Americans to the brink of bankruptcy. Now that Americans in bankruptcy will have to pay more back to creditors, they have a right to expect that credit card companies will lower their interest rates and fees. We will be watching credit card companies closely to see if they will become more responsible corporate citizens in return for this unprecedented gift from Congress.