4 fixes for a bad bankruptcy law

'A complete piece of garbage'

Bankruptcy judges, trustees and attorneys from both sides of the political aisle warned us loudly before the law's passage that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was a complete mess.

The law was crafted largely by credit lobbyists; attempts by some of the nation's most seasoned experts in bankruptcy law to provide guidance were soundly rejected. The act, these experts say, is filled with the kind of poorly drafted provisions and internal inconsistencies that led to the Littlefield decision. Bankruptcy judges across the country have denounced the law as inane and unjust. Longtime Tennessee judge Keith Lundin called it "a complete piece of garbage."Congress would be wisest to simply trashcan the whole thing and start over. Congress isn't often wise, though, but at the very least it should:

Fix the charitable contribution mess. People should be allowed to honor their long-standing commitments to their places of worship, even if it has to be at a reduced level.

Scrap the credit counseling requirement. Forcing consumers through a 90-minute credit counseling session before they're allowed to file bankruptcy is simply too little, too late. The post-filing sessions, where bankrupts are given instruction in financial management, make some sense, but the pre-filing sessions are a waste of time and money for all concerned.

Reduce the paperwork required for lower-income filers. If your income is below the median, you won't be subjected to the means test, but attorneys complain that they still have to comply with burdensome paperwork requirements that substantially increase the time they spend on each filing (and thus the cost to filers).

Provide more resources for cash-strapped filers. The law allows the courts to waive filing fees for filers in the most-dire straits, but the larger cost for consumers is attorney's fees. There need to be more low-cost options for consumers besides bankruptcy mills and potentially disastrous do-it-yourself filings (read "Beware cut-rate bankruptcy advice" for details). More money needs to be funneled to legal aid societies and others who provide the poor with sound legal advice.

And here's a thought: The banks, credit card companies and other lenders who paid for the passage of the bankruptcy reform act can write the check for this as well.

Liz Pulliam Weston's latest book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

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