Forest Hills bankruptcy attorney Kevin Ribakove said it’s nearly the same story every time.

“My clients are typically an individual or a couple who live month to month. Maybe they have $5,000 or $10,000 in savings,” he explained. “Over time they incur credit card debt, but they manage every month to pay off the minimum.

“Then there’s a layoff or a death in the family and all of a sudden they are in serious trouble. They take cash advances from one credit card to pay the other and then,” he paused, “they end up in my office.”

In the last 10 years, a sharp rise in credit card debt—over 50 percent by some estimates—has accompanied a rise in bankruptcy filings—a 125 percent increase. In the wake of such statistics, sweeping changes to the nation’s bankruptcy laws are set to take effect this fall. The new regulations will make it harder for American families to make a fresh start by declaring Chapter 7 bankruptcy and dissolving their debt.

Credit card companies—in addition to nearly all the major banking and real estate lobbies—have been pushing for new regulations like these for the past eight years. They argue that rising rates of bankruptcy filings and consumer debt necessitate stricter rules for paying back debt.

Consumer groups, on the other hand, have lambasted the legislation, calling it a giveaway to business interests at the expense of middle-class families, often hurt by job losses, divorce or medical crisis.

What Will The New Regulations Do?

The bill, dubbed, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, will force filers making more than the state median income—in the case of individuals in New York, about $40,000 a year—into Chapter 13 bankruptcy, which mandates repayment of some […]