Proposed changes to bankruptcy laws could help struggling families
Tags: 5 On Your Side, bankruptcy, consumer
Posted February 26, 2021 5:25 p.m. EST
Updated February 26, 2021 5:46 p.m. EST
By Monica Laliberte, WRAL executive producer/5 on Your Side reporter
Monthly bills remain a struggle for many families. As COVID-19 relief programs run out, bankruptcy could be the only option.
A push for changes to bankruptcy law would simplify the process to make it easier for people to get back on their feet.
For months, people who couldn’t afford their mortgage or student loan payments, have been able to hit pause on those bills, thanks to state and federal COVID-19 relief programs.
But consumer bankruptcy attorney Ed Boltz told 5 On Your Side, the programs won’t last forever. "We’re going to see, over the next six months or a year, I think, a lot of these protections being wheeled back. And that’s where bankruptcy is going to be necessary to help clean this up."
Boltz supports changes introduced last year in the Consumer Bankruptcy Reform Act.
One targets student loan debt where currently $1.67 trillion is owed.
Boltz says under the proposal, that debt would be treated as other debt — and discharged under a bankruptcy filing.
“There are people, especially young people, who are putting off starting families, buying houses, buying cars," says Boltz. "So it’s more and more acting as a drag on the economy because people aren’t able to get a fresh start.”
The proposal would also turn Chapter 7 and 13 bankruptcy into one filing, Chapter 10.
That would make it easier and less expensive to file for relief.
And Boltz says it will close loopholes that allow the wealthy to exploit the bankruptcy system.
"It used to be that bankruptcy was just this radical, crazy thing, and now people are looking at it more as all right, this is a way to control who gets relief and who doesn’t and how much relief they do or don’t get," said Boltz.
The bill did not make it out of committee in the last congressional session. Moving forward, there’s hope that lawmakers will revisit elements of it.