Question

Which of the following statements is TRUE regarding the circumstances surrounding Congress’s enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005?

Group of answer choices

Credit card companies and banks engaged in massive lobbying prior to the enactment of the law.

The statute was intended to protect consumers against for-profit universities that were inducing students to take out loans under false pretenses.

Congress was interested in reducing the incentive for major corporations to take on huge debt.

The number of bankruptcy filings rose in the wake of the enactment of the statute.

None of the above statements is true.

Answer 1

Congress was interested in reducing the incentive for major corporations to take on huge debt.

REASON :

• The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a major reform of the bankruptcy system, was passed by Congress and signed into law by President Bush in April 2005. Bankruptcy was reformed in a number of ways, including tighter eligibility requirements.
• The new law required that debtors prove there was no reasonable alternative to bankruptcy. All applicants were required to go through credit counseling before filing for bankruptcy. It must be through a federally approved program.
• The counseling created a repayment schedule. Debtors didn't have to follow it, but they had to show it to the bankruptcy court. During the bankruptcy proceeding, they had to return to counseling to learn good financial management practices.
• The law made bankruptcy attorneys personally attest that all information was accurate. As a result, lawyers' fees went up.