Bankruptcy Laws

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Bankruptcy Laws

Friday, January 9th, 2009    Subscribe To Our Feed

Bankruptcy Laws

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.

Now that the law has changed, there are more restrictions for filing chapter 7.

Before the 2005 revision, filers could choose which code they wanted to file under.

Income did not matter.

One of the biggest changes is that now those with a higher income will have to file under chapter 13 and therefore pay off some of their incurred debt.

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.

These financial tools are designed to help people become better aware of their spending habits and to assist them in becoming more financially stable.

There is also a change for chapter 13 bankruptcy filers and a new income demand of personal finances.

After paying for regular living expenses, any disposable income remaining must now go toward repaying any loans.

The IRS now determines the allowed actual living expenses, not the actual living expenses, if their income is higher than the median income in their state or 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.