Needs-based bankruptcy -- The vast majority of bankruptcy filers - more than 70 percent of 1997’s all-time record 1.4 million bankruptcy petitions - choose Chapter 7 of the Bankruptcy Code, which erases virtually all debts. While many families may face job loss, divorce or medical bills, and therefore legitimately need the protection provided by the bankruptcy code, research has shown that some Chapter 7 filers actually have the capacity to repay some of what they owe - but instead choose to walk away from their debts anyway. This costs the average American family $550 in increased costs for consumer goods and credit.

The Bankruptcy Reform Act of 1999 will ensure that high-income filers who could repay some of what they owe are required to do so. It accomplishes this goal through a needs-based system that takes a debtor’s income, expenses, obligations and any special circumstances into account when determining whether he or she has the capacity to repay a portion of their debts. However, the bill preserves the right of any filer earning less than the median national income (currently about $51,000 for a family of four) to automatically choose either Chapter 7 or Chapter 13, thereby preserving, protecting and enhancing the ability to obtain a legitimate "fresh start" in bankruptcy.

Puts women and children FIRST -- The legislation closes loopholes which allow some debtors to use the current bankruptcy system to delay or evade child support and alimony payments. In addition, the legislation moves the priority of these debts in bankruptcy up from their current position of seventh on the list of priority debts. These child support changes have been called "a veritable ‘wish list’ of provisions which substantially enhances our efforts to enforce support obligations during... bankruptcy" by Jonathan Burris, President of the California Family Support Council, which represents the interest of children in the establishment and collection of child support.

Bold new protections for consumers -- The bill includes education provisions that will ensure that debtors are made aware of their options before they file for bankruptcy, including alternatives to bankruptcy such as credit counseling. It also sets up a pilot program of financial management training for debtors in the bankruptcy system, to help educate filers so they can avoid repeating their mistakes. And the bill cracks down on "bankruptcy mills," law firms and other entities that push debtors into bankruptcy without fully explaining the consequences.

New creditor responsibilities -- The legislation also imposes new restrictions and responsibilities upon creditors. For example, the bill requires creditors to disclose more about the effect of paying only the minimum payment, limits the ability of a creditor to terminate an account just because a consumer pays his or her bill in full each month, and establishes new creditor penalties designed to encourage good-faith pre-bankruptcy settlements with debtors.