President George Bush on Wednesday signed into law a major bankruptcy reform bill that makes it tougher for consumers to erase their debts, including retail bills, by declaring personal bankruptcy. About 1.6 million people declared bankruptcy in 2004.
This is the biggest reform of the U.S. bankruptcy code in 25 years, and caps eight years of effort by its congressional supporters, business groups, bankers, and credit card companies to get it passed.
The new law requires a tough means test in order to file for bankruptcy. Those with incomes above a certain level and judged able to repay their debts will have to comply with court-approved payment plans It also limits the amount of “homestead” assets which can be pre-empted from the evaluation.
The U.S. House of Representatives approved the legislation on Apr. 14 by 302 to 126. It last month passed by 74–25 in the Senate, where it has stalled several times in recent years.
The reform has long been supported by many business groups, including Jewelers of America and the National Retail Federation.