Bankruptcy has never been a pretty word. Few of us aspire to it. Yet some of us, at a certain point in our lives, will find that declaring bankruptcy is the best thing to do. Unfortunately, it is on the verge of becoming much harder to do.

Let's back up a bit and define terms. You'll most often read in Fooldom about corporate bankruptcy, such as when a troubled firm files for Chapter 11 protection, as GenTek (NASDAQ:GETI) has done and as Delta Air Lines (NYSE:DAL) has threatened to do. Some firms, such as Kmart (NASDAQ:KMRT), emerge from bankruptcy protection to live another day, while others simply fade away or implode -- think Pan Am or Enron. Chapter 11 helps companies get their acts together. (Learn more in this classic Bill Mann article on how it all works.)

People can declare bankruptcy, too. For example, if you find yourself up to your eyeballs in debt, with creditors banging at your door, and you can't pay off your obligations or work out any payment plans, bankruptcy might be a way out. You could file Chapter 13 to give yourself a chance to repay your debts, or you could go Chapter 7 to wipe most of them out entirely by having most of your assets sold. (Learn more at

So what's going on in the world of bankruptcy? Well, Congress is taking steps to make it harder for individuals to file for bankruptcy. Many people might think that this is not a bad thing -- that those who are deep in debt are simply irresponsible with money and don't deserve help digging themselves out. Things are not always what they seem, though.

As Paul Krugman noted in a recent editorial in The New York Times, "A vast majority of personal bankruptcies in the United States are the result of severe misfortune. One recent study found that more than half of bankruptcies are the result of medical emergencies. The rest are overwhelmingly the result either of job loss or of divorce." This isn't hard to believe when you stop to consider how rapidly the cost of health insurance has been escalating, and the fact that more and more Americans are uninsured. Some, of course, disagree with Krugman's conclusions, but it's true that medical emergencies are a significant (and growing) cause of bankruptcy.

The expected changes are designed to make more people file Chapter 13 instead of Chapter 7, thereby leading to fewer debts being wiped out. Charge card companies that may benefit include MBNA (NYSE:KRB), American Express (NYSE:AXP), Capital One Financial (NYSE:COF), and Citigroup (NYSE:C). Krugman, who leans left of center, decried the changes as rewarding the credit card industry while hurting us: "The bill would make it much harder for families in distress to write off their debts and make a fresh start. Instead, many debtors would find themselves on an endless treadmill of payments."

The Consumer Federation of America is also on record as opposing the changes. It points out that the enormous law -- more than 500 pages long -- is chock-full of "loopholes" and "restrictions" that will make things tough for Americans in trouble. For example, your income over the past six months will partly qualify or disqualify you. But if you're in trouble because you just lost your job, that income isn't really there anymore.

It's commendable to want to change the laws to prevent the fiscally irresponsible from taking advantage of the system in an abusive manner. But it will be a shame if responsible, hard-working people who fall on hard times end up facing even harder times because of these changes.

If you're deep in debt, learn more about the new rules -- and consider letting your congressional representatives know what you think about them. Meanwhile, know that you can dig yourself out of debt, and that we're here to guide and support you. Drop by our Credit Center for more info, and check out our free seminar there.

By the way, here's an upside to bankruptcy -- a swelling portfolio. Philip Durell wrote about how you can profit from bankruptcy in a recent article. He's the lead analyst for our very promising Inside Value newsletter, which has more than doubled the market's return in its first few months of existence. Grab a free sample copy of it to see what he's recommending.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.