Democratic Presidential Candidate Barack Obama Calls For New Bankruptcy Reform

Democratic presidential candidate, Barack Obama, vows to put back some of those protections that were taken away from consumers when Congress passed, and the President signed into law, BAPCPA in 2005.

According to the Associated Press and Fox News, Obama has proposed changing bankruptcy laws to fast-track the process for military families, help seniors keep their homes, and protect people recovering from natural disasters. In doing so, Obama also accused Republican rival John McCain of repeatedly siding with the banking industry, saying, “When it comes to strengthening the safety net for hardworking families, he’s been part of the problem, not part of the solution.”

Obama stated, “Like the president he hopes to succeed, Sen. McCain does not believe the government has a real role to play in protecting Americans from unscrupulous lending practices. He would continue to allow the banks and credit card companies to tilt the playing field in their favor, at the expense of hardworking Americans.”

McCain spokesman Tucker Bounds responded in a statement: “Eighteen Democrats and John McCain worked together on the bipartisan Senate bankruptcy bill, and Barack Obama’s rigid partisanship and self-promoting political attacks show that he’s a typical politician — which is the problem in Washington, not the solution.”

Obama’s new proposals supplement his broader — and previously announced — bankruptcy reform agenda that includes changes intended to help people in financial distress because of medical bills and allow homeowners going through the bankruptcy process to renegotiates terms of their mortgages.

The Democrat said he also would help service members and military families struggling financially after multiple moves, lengthy deployments and, in some cases, predatory lenders, saying, “If you’re protecting America, America should be protecting you from unfair bankruptcy laws.”

He pledged to expedite the bankruptcy process for them by exempting them from a “harsh means test,” cutting “unnecessary paperwork” and “token counseling,” and enacting a minimum homestead exemption to help them keep a greater share of their home’s value.

Obama also wants to allow a speedier bankruptcy process for all service members regardless of what state they live, a departure from current law that says people can use federal bankruptcy exemption laws if their state of residence allows. Some 35 states bar families from federal exemptions, according to a campaign-issued fact sheet.

As for seniors, Obama said, “I’ll help make sure that if you’re over 62 and facing bankruptcy, you’ll have a better chance of keeping your home.”

He said people in that age bracket would get a minimum federal homestead exemption equal to the median cost of a home in their state, “giving them a better chance to keep their homes and helping them maintain both their independence and their financial security.”

In addition, Obama said he would help families recovering from a natural disaster by streamlining the bankruptcy process for those in certified natural disaster areas by eliminating “unnecessary paperwork” and waiving “unneeded credit counseling requirements.”

He also promised to enact a 120-day moratorium “on adverse credit actions from collectors, such as foreclosure” to free families from concerns about collectors as they are trying to recover. And, his campaign said he would amend the Equal Credit Opportunity Act, which bars discrimination in lending, to include protection for disaster victims, so that lenders do not unfairly restrict credit to such families.