AFSA applauds the bipartisan efforts of Congress to reform the bankruptcy system in America by passing S.256, "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005." The House of Representatives passed the bill in its original form on April 14th by a vote of 302-126. AFSA played a leadership role within the Coalition for Responsible Bankruptcy Laws with the goal of the final bankruptcy reform package reaching the President's desk early this Spring.

S.256 encourages personal accountability and responsibility, something that is highly important to both the consumer public and to AFSA members. Nearly 1.6 million personal bankruptcy filings occurred last year—with the losses passed on to all consumers in the form of higher interests rates and fees. Americans knew the system was broken and Congress took a major step in fixing it.

The bill creates a means test to determine whether personal bankruptcy filers have the ability to repay some or all of their debts. Based on median incomes in individual states, the means test will be used to decide whether an individual should file under Chapter 13 or Chapter 7 bankruptcy protection. This legislation still allows any American to seek bankruptcy protection. Under the bill's needs-based formula, those facing exorbitant medical costs and other circumstances that indicate a true need for a complete "fresh start" will be able to obtain it under Chapter 7. Only higher-income individuals who clearly have the ability to repay a meaningful portion of their debts will be required to do so under Chapter 13.

AFSA and the Coalition for Responsible Bankruptcy Laws won broad support by Members of Congress in backing this much needed and long-overdue reform.