Bankruptcy Reform

It's the largest rewrite of U.S. bankruptcy law in a quarter century. President Bush says it will restore fairness to a system that's been widely abused.

President Bush said, "under the new law, Americans who have the ability to pay will be required to pay back at least a portion of their debts."

Practical says Bush, but some bankruptcy attorneys disagree.

Under the law, a judge will determine the amount you can pay back to creditors in monthly payments. That will be determined by how much money you make, and how much you need for living expenses.

David Stephens, a bankruptcy law specialist said, "the expenses that you're going to be able to claim on you're monthly expenses like food, clothing, electricity. Things of that nature are going to be severely limited when we try to determine how much you do have the ability to pay."

That's because the judge is going to base what you can pay by what he thinks you can live on. The judge will determine that, based on the same standards used by the IRS.

Stephens said, "a standard of standard sets of expenses and they're a lot lower than most people that I know use every month."

The bottom line of the bill is that creditors don't lose everything, they still get at least a minimal payment. But those filing for bankruptcy will now have to live on a minimal budget to make those payments happen.

The new law won't affect everyone. It only applies to those making more than the medium income for their state. Those making less and those with special circumstances can still file for a complete bankruptcy without having to make payments.