Here are a few of the major changes Congress is looking at. Currently, a Senate Judiciary subcommittee has approved a bankruptcy bill, which now awaits full committee action. In the House, the Judiciary Committee is marking up the bill and is expected to send it to the floor shortly. Under Chapter 7 of the Bankruptcy Code, a debtor does not attempt to pay off creditors. Cases go to a trustee, who takes over any assets that the debtor can't exempt and distributes proceeds to creditors.
Exempt property includes homes, cars and other personal property, up to a dollar limit.
Tools of the debtor's trade are exempt, and so are insurance policies and retirement assets. Frequently, there's nothing left after exemptions. Creditors don't get anything, and that's what they don't like. Abusive Chapter 7 cases, under Senate and House versions, are those in which the debtor can pay at least 20 percent of unsecured claims. A debtor who can pay at least 20 percent will be forced into a bankruptcy under Chapter 13 of the code.