CRS Issue Statement on Bankruptcy in a Distressed Economy (CRS Report for Congress)
| Release Date |
Jan. 6, 2010 |
| Report Number |
IS40260 |
| Authors |
Carol A. Pettit, Coordinator, Legislative Attorney |
| Source Agency |
Congressional Research Service |
Summary:
Article I, Section 8 of the Constitution gives Congress power to establish uniform laws onthe subject of bankruptcy throughout the United States. Two of the major purposes of thebankruptcy code-to allow overwhelmed debtors to make a fresh start and to provide forequitable treatment of creditors-are in perpetual tension. At any given moment, either debtors orlenders are likely to feel that the law favors the other group. Thus, there is constant pressure tochange the Bankruptcy Code. In 2005, Congress enacted significant and controversial changes inthe code with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA; P.L.109-8). Although it included some changes involving business bankruptcies, BAPCPA hasgenerally been viewed as having made bankruptcy less friendly to consumers. There was a surgein consumer filings just before the new law took effect in October 2005. After the new law tookeffect, the number of consumer filings dropped sharply, but they have risen steadily since.
