Bankruptcy – the New Law
Last Updated: 04/03/06

 In This Issue

This issue of Profitwise News and Views features articles on

  • District News
  • Poverty and the location of financial institutions
  • The new bankruptcy law
  • An Illinois program to help working families buy homes

Around the District

This article summarizes news and events in Illinois, Indiana, Iowa, Michigan and Wisconsin.

The Impact of Poverty on the Location of Financial Establishments: Evidence from Across-County Data

The location of bank branches is an important issue
for consumer advocates and other groups that monitor
access to financial services for low- and moderate income
people. The proximity of banks and their branches
to the places where people live and work is one basic
element of mainstream financial access. The ability of
people to choose from an array of financial products,
especially those offered through the banking system, is
fundamentally related to the economic well-being of a
community. Read more ... 

Bankruptcy – the New Law

New provisions under bankruptcy law became effective
on October 17, 2005. The Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005 was passed by the
109th Congress on April 14, 2005, and signed into law by
President Bush on April 20, 2005.

The new legislation made sweeping changes to existing
bankruptcy law, and the main result appears to be that
it will now be more difficult for certain individuals to
discharge all debt in Chapter 7 filings than under the old
law. Individuals under the new law will have to demonstrate
whether or not they have the ability to repay some or all of
their debt. If the court determines that the consumer does
have the ability to repay, s/he will be forced into Chapter
13, as opposed to Chapter 7. The filer as an alternative
may simply withdraw the filing. There is now a “means
test” to qualify for Chapter 7. Simply put, Chapter 7 results
in the extinguishment of all debt, other than priority
debt such as child support, taxes, and certain types of
judgments. Chapter 13 does not extinguish all non-priority
debt, but requires repayment of at least some debt (often
including unsecured debt) over a certain time period—
generally three years under the prior statute and five years
under the new. Read more ... 

Illinois Launches Program to Help Working Families Buy Homes

Building on a commitment to help working families realize
the American Dream of homeownership, the state of
Illinois has launched a new mortgage program designed
to help working, taxpaying individuals and families buy

The program, called Opportunity I-Loan, will help
individuals and families who are first-time homebuyers
and do not have traditional checking accounts or have
not been able to establish credit histories, qualify for low interest
mortgage loans. This program will make Illinois
only the second (and the only current) state in the nation
to provide affordable, 30-year fixed-rate mortgage loans
for qualifying individuals and families that work and pay
taxes – but have either no (traditional) credit history, no
Social Security number, or have neither. The program also
serves as a viable alternative to high-cost, predatory home
loans. Read more ...