Bankruptcy Laws
Bankruptcy Legalities
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 then, Chapter 7 was the most common form of bankruptcy in the United States, because in a Chapter 7 bankruptcy individuals are allowed to keep certain exempt property.
Many people spent years being careless with their credit and debts because it could be fixed with a quick filing for bankruptcy.
Today, filing for chapter 7 is not as easy as it was before, because they have added several new restrictions to it.
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 new law added certain limitations to be placed on bankruptcy lawyers.
Because of this, some lawyers no longer are willing to take on clients wanting to file for bankruptcy.
In addition to the new income restrictions, there is also mandatory counseling that debtors must complete before and after filing for bankruptcy chapter 7.
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.
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. Filing for bankruptcy is not a decision to take lightly, therefore you would do good to consult an attorney that can help you better understand the legalities that could effect your decision.
