The New Bankruptcy Laws That You Should Know About
There are many bankruptcy laws that need to be taken seriously because not every one is aware of the obvious repercussions that can have a dramatic impact on your life.
Significant changes in consumer bankruptcy laws took effect on October 17, 2005, with passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Before that time, filing for chapter 7 bankruptcies was an easy way out of financial obligations.
Before the changes in the law were enforced, many people were lacking in good judgment on how they used their credit, which created so much debt they would just file for bankruptcy as a quick solution.
Today, filing for chapter 7 is not as easy as it was before, because they have added several new restrictions to it.
Previous to the updated bankruptcy law in 2005, people had the ability to select the code they wanted to file under.
Income did not matter.
The most obvious change was made in how a person files, based on their income; for example, people that filed for bankruptcy under Chapter 13 of the Bankruptcy Code, have the opportunity to repay some or all the debts in their name, in better terms, i.e. lower or no interest and that is unlike Chapter 7 which involves liquidation of assets.
The law also imposed new restrictions on bankruptcy lawyers.
Because of this, some lawyers no longer are willing to take on clients wanting to file for bankruptcy.
Another change, is that now people planning to file for personal bankruptcy under chapter 7, must complete the mandatory credit counseling first.
Individuals that decide to pre-file, still have to complete the credit counseling requirement and people that post-file must complete a financial budget that they will use.
In light of our current economic situation, many feel these new standards should have been executed several years earlier.
They are designed to keep people aware of their spending and keep them on track.
There is also a change for chapter 13 bankruptcy filers and a new income demand of personal finances.
All disposable income left after paying actual living expenses must now go into their repayment plan.
However, now the IRS has set in place a system within each state to determine what the accepted living expense level will be, based on the average income earning per capita. Before filing for bankruptcy, you need to carefully consider all your options and become well informed on the legal aspect surrounding any new laws that may pertain to your personal situation.
Last 10 posts in After Bankruptcy
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- Pre-Bankruptcy Counseling - September 6th, 2009
- Arizona Bankruptcy - December 4th, 2008
- Enter Bankruptcy Protection - November 8th, 2008
- Student Loan Bankruptcy - October 26th, 2008
- Credit Cards After Bankruptcy - October 25th, 2008
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14 comments
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