Bankruptcy: What the New Law Means to You

On April 20 of this year, President Bush signed a bankruptcy reform law. When this law goes into effect in October of this year, it will be much more difficult for Americans to use Chapter 7 bankruptcy to get a fresh start on their financial lives.

Under current law, you can choose to file either a Chapter 7 or Chapter 13 Bankruptcy. In a Chapter 7 proceeding, you are allowed to keep your exempt property, such as much of the equity in your home. Most of your other debts, such as money owed on credit cards, are discharged.

In comparison, a Chapter 13 Bankruptcy is a reorganization bankruptcy. In this type of proceeding you agree to pay off your debts over a period of three to five years.

The result of the new law is that fewer people will be able to file for Chapter 7 Bankruptcies and will be forced to file for Chapter 13 Bankruptcies, instead.

Major Changes

Possibly the biggest change to bankruptcy law is that there will now be a qualifying test. Under this two-part test, you will first be required to apply a formula that exempts certain expenses such as food, rent, etc., to see if you can afford to pay 25 percent of your "non-priority unsecured debt" (credit cards, medical bills and the like). Second, your income will be compared to your state's median income.

If your income is above your state's median income, and if you can afford to pay 25 percent of your unsecured debt, you will not be allowed to file for a Chapter 7 Bankruptcy.

You may be able to file for a Chapter 7 Bankruptcy if your income falls below your state's median income but you can pay 25 percent of your unsecured debt. However, if the court believes you would be abusing the system by filing a Chapter 7, you can be required to file for a Chapter 13 Bankruptcy, instead.

More differences

If you file a Chapter 7 Bankruptcy today, the court will determine what you can afford to pay based on what you and the court determines are reasonable and necessary living expenses.

Under the new law, the court is required to apply living standards that are derived by the Internal Revenue Service to determine what is reasonable to pay for rent, food, etc., and how much you should then have left over to pay your debts. The IRS regulations are more stringent and if you want to contest them, you will need to ask for a hearing in front of the bankruptcy judge. This can easily mean more time and expense.

Tougher exemptions

When you declare bankruptcy today, your state may allow you to keep all or much of the equity you have in your home. However, the new law places tougher restrictions on this exemption. So before you file, be sure to discuss this with a knowledgeable bankruptcy attorney so that you will know exactly how much of your home's equity you can expect to protect.

Credit counseling

Here's another tough restriction. Under the new bankruptcy law, you must meet with a credit counselor in the six months before you apply for bankruptcy. You must also attend money management courses ? at your expense ? before your debts are discharged.

Since the new law makes it so much tougher to declare a Chapter 7 Bankruptcy, you might think about filing now, before it goes into effect. Before you do anything, make sure you talk to a good bankruptcy attorney. Also, be sure to keep in mind that it takes a couple of weeks to file for bankruptcy. This means that if you want to take advantage of the current law, you should plan on filing at least by the beginning of September of this year.

For FREE help with debt and credit, subscribe today to Douglas Hanna's free email newsletter "8 Simple Steps to Debt Relief" at http://www.all-in-one-info.com

---

Debt Settlement

What is debt settlement?Debt Settlement is a process to settle... Read More

Benefits and Drawbacks of Bankruptcy

Outlined below are some of the benefits and drawbacks of... Read More

How to Reduce Your Debt in 5 Easy Steps

If you have incurred substantial personal debt, consider these options:... Read More

Hide That Car! Fighting the Repo Man

Vehicle repossession may appear justified in circumstances where a person... Read More

A History of Money and Banking Secrets That Banks Dont Want Published

A History of Money and TradeTo start with a history... Read More

Credit Repair? Its All Up to You

Log onto to a search engine such as google.com and... Read More

Free Quick and Easy Money Saving Tips ? Part 1

With the high cost of gasoline and the amount of... Read More

Corporate Debt Management ? Perspective on the Why

Entrepreneurs have a tough time in their formative years. They... Read More

New Bankruptcy Law ? Five Essential Things to Know

Last April, Congress passed the Bankruptcy Abuse and Consumer Protection... Read More

IVA Advice

An IVA (individual voluntary arrangement) is an alternative to bankruptcy... Read More

Getting Past The Idea Of Budgeting & Saving Money

I'm sure you'll agree that budgeting, saving money, and eliminating... Read More

Why You Should Get Out of Debt Today?

The main reason for getting out of debt today, is... Read More

Debt Elimination Is The Key to Financial Freedom

If you want financial freedom, the first thing that you... Read More

Bankruptcy Abuse

Bankruptcy is little more than a smack on the hand... Read More

Debt Collectors; And what you can do to Get Them Out of your Life

FTC opinion letter on validation Section 809(a) of the FDCPA,... Read More

Bankruptcy Interest Increases as Deadline Approaches

Congress recently passed sweeping legislation that will significantly reform American... Read More

What is Bankruptcy?

Here is a useful guide to bankruptcy. It should be... Read More

Bankruptcy - The Easy Option?

Incredibly, since the changes in the bankruptcy law in April... Read More

Bankruptcy - Is It The Right Choice For You?

Bankruptcy is one of the tougher choices we as adults... Read More

Utah, the Nation?s Bankruptcy Capital

Congress recently passed the Bankruptcy Abuse Prevention and Consumer Protection... Read More

Credit Card Debt Elimination

Credit card debt elimination can be done with a good... Read More

New Bankruptcy Law ? Where?s the Consumer Protection?

On April 20, 2005, President Bush signed into law the... Read More

The Road to Debt Relief

Living with debt is not something someone hopes for, but... Read More

Bankruptcy, Is It A Way Out

Negotiations with creditors have failed. Repossession is imminent and foreclosure... Read More

Christian Debt Consolidation ? Feel Comfortable About Managing Your Debt

Many Christians feel uncomfortable with the notion of being in... Read More

Creating A Realistic Budget

Budgeting -- ooh, what a scary word! If you want... Read More

Reduce Your Debt

Do you want to reduce your debt? Having trouble paying... Read More

Five Major Ways to Save Money

There are two main roads to improving your personal finances:... Read More

Debt

We all know about debt. If you don't have too... Read More

Debt Settlement : What You Need To Know

Debt Settlement companies work with your creditors to help you... Read More

5 Options Toward Debt Relief

If you are in debt, well over your head in... Read More

The Debt Free Lifestyle

Many people have been taught that you cannot get ahead... Read More

Debt Help and Advice for the UK

At some time or another during our lives most of... Read More