The Bankruptcy Reform Act

The Bankruptcy Reform Act, enacted in 2005, aimed to update and strengthen bankruptcy laws. It made it more difficult for individuals to file for Chapter 7 bankruptcy (which wipes out most debts) if they have significant income, pushing many to file under Chapter 13 (which involves repayment plans). The law introduced rules to prevent abuse of the system, increased credit counseling requirements, and established clearer guidelines for debt repayment. Overall, it sought to balance debtor relief with protecting creditors’ interests, promoting responsible borrowing, and reducing fraudulent or misuse of bankruptcy protections.