Obama Pledges Specific Bankruptcy Reform for Seniors, Military Families, Disaster Victims

It’s tough to sort through the rhetorical mess of the campaign trail; candidates are notorious for delivering heavy lip service.

It can be even harder to decipher where a candidate stands on matters of the economy.

Democratic candidate Sen. Barack Obama is hoping to cut through the chaos of a presidential election and inform voters about his plans to protect consumers when filing bankruptcy.

In a recent speech, Obama was openly critical of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which has made it more difficult for people to file bankruptcy.

He portrayed Sen. John McCain, his Republican opponent who supported the act, as a crony conspiring with the credit card industry. McCain quickly retorted, stating that 18 Democrats also voted in favor of the bill.

Robert Lawless, law professor at the University of Illinois and contributor to The Credit Slips Blog, recently told the Wall Street Journal that Obama’s bankruptcy reconstruction plan has “gone as far as anybody who’s had the ability to get things enacted into law has proposed.”

Obama’s proposal would indeed result in significant changes to the present BAPCPA.

As the law currently stands, senior citizens, military families and natural disaster victims are treated with the same scrutiny as everyone else attempting to file bankruptcy. Obama plans to add amendments to the law in an effort to better protect those groups of people when filing bankruptcy.

Specifically, for senior citizens over the age of 62, Obama would give a minimum federal homestead exemption equal to the median cost of a home in their state, allowing them to stay in their homes and maintain their financial independence. Obama reiterated the importance of homeownership in a recent Atlanta Journal-Constitution article, calling it a “cornerstone of retirement.”

Obama is also focusing in on the struggles of military families. He plans to have them participate in a “fast-track bankruptcy practice” that, among other things, would allow them to bypass the Chapter 7 means test, cut back on cumbersome paperwork and allow for a minimum homestead exception to increase their share of their home’s value.

For military families, the need for these allowances is exceptional—their foreclosure rates are nearly four times greater than the typical U.S. rate.

Obama also wants to reach victims of natural disasters. Hurricanes, wildfires, floods and other calamities seem to be causing more and more damage to homeowners and their pocketbooks.

Obama intends to streamline the bankruptcy filing process for them, ridding the system of cumbersome paperwork and waiving credit-counseling requirements, which he’s often called “unnecessary” and “unneeded.”

The Democratic candidate has also been vocal about the need for extra bankruptcy protections for people facing significant medical debt from an unexpected illness or injury.

Obama’s proposals are similar in nature to Sen. Dick Durbin’s (D-IL) proposed legislation, which allows bankruptcy courts to amend the mortgages of a debtor’s main residence.

With the stressed economy affecting millions of Americans, bankruptcy is a critical topic of discussion for both the Democrat and Republican presidential candidates. To learn more about where they stand, visit these related articles:

If you or someone you know is struggling with debt, consider talking to a bankruptcy lawyer about your options.