Bankruptcy Reform Act of 2005 Increases Credit Debt

Credit card debt is the most impactful obstacle for Americans today. Most average households in the US have a credit balance of $6,500, an amount that is steadily growing year by year. Individuals are constantly harassed by debt consolidation companies in the privacy of their homes to personal offices, even after minimum payments are made. The sheer pressure of constant bill collecting, through phone calls and continuous paper mail, while attempting to provide for one’s children and home, can lead to damaging psychological effects on any individual in debt. Bankruptcy was an option for individuals with debt beyond any form of credit card debt relief, but since Bankruptcy Reform Act of 2005, that protection has all but disappeared. Unfortunately creditors have increased the marketing of their cards and are seeking to increase the national consumer debt.

In order to understand the importance of the Bankruptcy Reform Act of 2005, one must understand what bankruptcy actually is. In its most laymen terms, bankruptcy is a claim a person can make that will exonerate their requirements to pay credit card debt without the need for debt relief services. As a result this person does not have to pay their obligated credit card debt, but will have heavy limitations placed on their financial activity. In many individuals must file for bankruptcy because they legitimately cannot obtain credit card debt relief by any other means.

Unfortunately the Bankruptcy Reform Act of 2005 has made it significantly harder for individuals to file for bankruptcy. Although already a lengthy process, the Reform Act has made filing for bankruptcy near impossible due to the new requirements needed of individuals. Individuals must now show documentation that they have already sought debt relief services prior to filing. The government is now able to analyze a person’s income to debt ratio. If their income is greater than their debt, credit card debt relief in the form of bankruptcy will not be permitted. One of the most important changes is that the responsibility of providing all documents must now fall on the debtor, while the lender has the right to withhold such documentation.

These limitations on bankruptcy are providing credit card companies the means to further increase their hold on Americans every day. They are marketing their cards more so now than prior to the Reform Act because individuals face a greater opposition to their bankruptcy claims. Card companies are now pushing cards much more aggressively knowing that individuals can spiral into debt without having a last resort to aid them. In the Midwest alone, the rate of bankruptcy fell around 200,000 people annually from 2005 to 2006. While the nation’s bankruptcy claims fell, the nation’s consumer debt increased to almost 2.4 trillion dollars. It is imperative that individuals to seek debt relief services because credit card companies are using the Bankruptcy Reform Act of 2005 to trap individuals while removing their protection against out of control debt.