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Lawyers: New law only hurts the innocent
By Marcy Gordon
the associated press
Tucson, Arizona | Published: 02.23.2006

WASHINGTON - A new law making it harder to erase debts in bankruptcy has
failed to stop abuses and has stymied people who have legitimate reasons to
file, a group representing bankruptcy attorneys contended Wednesday.

A report released by the National Association of Consumer Bankruptcy
Attorneys was based on an analysis of 61,335 people who have gone to
credit-counseling agencies, the required first step before filing bankruptcy
under the law that took effect Oct. 17.

Of those people, 97 percent were unable to repay any debts and 79 percent
had gotten into financial trouble because of job loss, huge medical expenses
or the death of a spouse, the report said.

"Contrary to the claims of proponents of bankruptcy-law changes that they
would zero in on the alleged legions of 'deadbeats,' '' the new law is doing
no measurable good, said Brad Botes, executive director of the bankruptcy
lawyers' group. "Instead, (it has) put new hurdles in the path of people who
are already flat on their back due to financial crises over which they have
no control."

The new requirement for credit counseling, which involves drawing up a
debt-management plan for consumers, "simply imposes new costs and time
burdens on individuals who can ill afford either," Botes said.

Noting a decline in personal bankruptcy filings since the law went into
effect, he said it had occurred because many people "may mistakenly believe
that the courthouse doors are barred to them" under the law.

The new law, the most sweeping overhaul of the U.S. Bankruptcy Code in a
generation, bars those with above-average income from Chapter 7 - where
debts can be wiped out entirely - except under special circumstances.

Those deemed to have at least $100 a month left over after paying certain
debts and expenses now must file instead a five-year repayment plan under
the more restrictive Chapter 13.