Some are decrying the proposals, claiming they will be harmful to those who have fallen victim to unanticipated financial disasters not of their own making. Supporters of the legislation, on the other hand, contend that, under current law, many debtors can walk away with relative ease from massive credit card debt or other legal obligations. Bankruptcies are up 84.2 percent since 1990. That increase is driven by personal filings, which have increased 94.7 percent since 1990 while business bankruptcies have dropped by 31.6 percent over the same period. While that in no way absolves an indivudual consumer of his or her responsibility, it does suggest that the industry should be far more cautious, both in issuing credit cards and controlling their credit limits.
Debtors seeking to declare insolvency now have four avenues under the U.S. Bankruptcy Code.
Chapter 7 is available both to individual and business debtors. Its purpose is to achieve a fair distribution to creditors of whatever non-exempt property the debtor has while providing the debtor with a fresh start. Chapter 11, also available both to consumer and business debtors, is designed to rehabilitate a business or reorganize an individual's finances through a court-approved plan. Chapter 12 gives special debt relief to a family farmer with regular income from farming. Chapter 13 is available to individuals with regular income whose debts do not exceed specific amounts and provides for at least partial repayment to creditors by budgeting some of the debtor's future earnings.