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
In all the technical discussion you hear about credit... Read More
If you've ever earned enough money to put some aside,... Read More
Have you ever felt trapped in a Rat Race and... Read More
What Everybody Needs To Know...Learn The Truth About Debt Elimination... Read More
When you hear the word "debt", whats the first thought... Read More
With mounting bills and unforeseen hardships, you may be considering... Read More
Lots of people take a large ammount of loans and... Read More
It happens all the time. Debt collectors try to collect... Read More
Budgeting -- ooh, what a scary word! If you want... Read More
Almost all Americans carry credit card debt. Actually, over 40%... Read More
If you are determined to pay credit card debt off... Read More
WILL MY CREDITORS STOP HARASSING ME?Yes, they will! By law,... Read More
Educating yourself about the ins and outs of debt negotiation... Read More
Today's consumers benefit drastically from the usefulness of credit. Credit... Read More
People often get to a place where they simply can't... Read More
Ask a friend what resolutions they made for 2004 and... Read More
Debt Management plans offer credit counseling clients a different and... Read More
The overwhelming task of eliminating your debts can often seem... Read More
Do you have multiple debts? Do you have just one... Read More
Bankruptcy and Credit - What Happens After Your Debts Are... Read More
Bankruptcy is one of the tougher choices we as adults... Read More
I'm not sure where it originated, but I've heard it... Read More
What is Credit?Credit means that you are using someone else's... Read More
Amy Wright, 34, was extatic when her realtor showed her... Read More
On April 20, 2005, President Bush signed into law the... Read More
If you are considering bankruptcy as a solution to your... Read More
Do you, like millions of other Americans, feel like you're... Read More
Although many consumers would argue differently saving money doesn't have... Read More
Debt Help is the stepping stone to debt elimination and... Read More
Are you still clearing a mountain of debt amassed last... Read More
Planning To Achieve Debt EliminationOnce you have started the process... Read More
If you're thinking about an IVA, it is essential to... Read More
Debt consolidation versus debt negotiation are two options that are... Read More
As consumer debt continues to spiral out of control, debt... Read More
The financial and psychological burden of being in debt causes... Read More
Congress recently passed sweeping legislation that will significantly reform American... Read More
If you're reading this article right now I'm sure that... Read More
Are you among the millions of people who have found... Read More
People often get to a place where they simply can't... Read More
For many, the word 'budget' immediately sends shivers down the... Read More
Sometimes debt can seem overwhelming. In those instances, or even... Read More
The New Year often brings with it a desire to... Read More
A debt solution like bankruptcy should really only be used... Read More
FTC opinion letter on validation Section 809(a) of the FDCPA,... Read More
There are some new bankruptcy laws going into effect before... Read More
It is possible for creditors and third-party collection agencies to... Read More
Many consumers that are bogged down in debt frequently turn... Read More
Do you want to reduce your debt? Having trouble paying... Read More
Step 1. The purpose of this first step is to... Read More
In today's consumer society it is all too easy to... Read More
Debt negotiation and settlement can give you a drastic reduction... Read More
Knowing how to negotiate debt settlements is the key to... Read More
A History of Money and TradeTo start with a history... Read More
Lots of people take a large ammount of loans and... Read More
If you're thinking about an IVA, it is essential to... Read More
Want to know if your attitude towards your finances is... Read More
Bankruptcy still remains a mystery in the eyes of many... Read More
What Is an IVAThe IVA (Individual Voluntary Arrangement) was introduced... Read More
Do You Need to Join a CCCS - Consumer Credit... Read More
Bankruptcy laws give debtors a way to resolve debt by... Read More
Having something tangible to strive towards can work wonders for... Read More
A headline for a retirement annuities flyer declares "Future Secured!"... Read More
So you've screwed up. You're drowning in debt. Maybe the... Read More
While driving around your community, you may have seen signs... Read More
Do you have multiple debts? Do you have just one... Read More
Anyone who embarks on a debt reduction program should know... Read More
Debt Relief |