Spring Cleaning Key to Financial Well-Being, Crapo Says; Bankruptcy Reform Around the Corner
WASHINGTON-Spring is the opportune time to clean financial house as well as the tangible one, Senator Mike Crapo (R-Idaho) stated recently. Given that April is National Financial Literacy Month, it is a fitting time to get finances in order he said in a recent column submitted to several Idaho-based organizations. "Congress recently passed legislation that addresses the cost borne by all Americans when people allow their finances to spiral out of control," Crapo wrote. "The Bankruptcy Reform Act of 2005 will relieve some of the aggregate burden that we bear when filers who have the ability to repay some debt under Chapter 13 instead file under Chapter 7 provisions." The bulk of bankruptcy filings are legitimate and those are the filers the law is there to protect, he noted. "Bankruptcy laws were originally implemented to help people in catastrophic financial ruin. But a full seven to ten percent of bankruptcy filings (about 100,000 to 150,000) are abusive under the intent of the law, and cost consumers approximately $3 billion." The means test should help alleviate this problem, according to Crapo, as well as targeting those who have "substantial" ability to repay. "Bankruptcy filings force financial institutions, the medical community and other creditors to recoup lost money. They raise interest rates, shorten grace periods and assess higher late charges and penalty fees to mitigate risk-all social costs borne by you, me and anyone else who uses banks, credit unions, or seeks medical care." Though the law will address abuse of the system, he said, the "inordinate increase" in filings signifies a larger problem as unsecured consumer debt rises to new records.