New Bankruptcy Law - Five Essential Things to Know


Last April, Congress passed the Bankruptcy Abuse and Consumer Protection Act, the most sweeping reform of our nation's bankruptcy laws in more than twenty-five years. Proponents of the bill argue that most consumers who file for bankruptcy do so simply because they do not wish to pay their bills. That is an arguable point, as studies show that most bankruptcy filers have suffered illness, injury or job loss. Regardless of the reasons, Congress has made the changes, and millions of Americans will be affected when the new law takes effect on October 15.

Here is a short list of the changes and how consumers will be affected.

  • Goodbye, Chapter 7 - Until now, most consumers have been permitted to file under Chapter 7 of the Federal bankruptcy code. Chapter 7 permits the court to wipe away most consumer debt, allowing the debtor to make a fresh start. The new law establishes a "means test." Anyone with income that exceeds the median income for his or her state will have to file under the stricter Chapter 13 instead, which requires a repayment schedule of up to five years.

  • Attorney problems - The more complicated Chapter 13 filings will make it necessary for filers to hire an attorney. Most attorneys who practice bankruptcy law are already reporting dramatically increased business; some are even turning clients away. If you need an attorney, hire one now, as they are soon going to be very busy

  • More attorney problems - The law also leaves lawyers legally responsible for the accuracy of the information filed on their clients' behalf. This has led most lawyers to increase their fees. Some, including those who do bankruptcy work on a pro bono, or free, basis, have decided to forego bankruptcy work altogether. In short, it will soon be more difficult and more expensive to hire an attorney.

  • Mandatory credit counseling - Congress has required that debtors obtain credit counseling from an approved agency within six months of filing for bankruptcy. As of now, this requirement is largely undefined, with rules, regulations, and qualifications for counselors still up in the air.

  • Expect to may more bills - Some obligations, such as student loans or taxes, must be paid in full even after a bankruptcy filing. The new law lengthens the list of debts that cannot be forgiven.

    • The new legislation, rightly or wrongly, makes it more difficult, more time consuming and more expensive for a debtor to file for bankruptcy. Consumers who are considering doing so should act now, as the regulations will soon become stricter. Bankruptcy should always be a last resort option, but if you cannot avoid it, you should act quickly.

    ©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a site devoted to establishing credit, debt consolidation and credit counseling.

    MORE RESOURCES:
    RELATED ARTICLES
    Student Loans Can't Be Swept Away Through Bankruptcy
    Bankruptcy is in the news these days, as Congress has finally overhauled the Federal bankruptcy law after years of talking about it. The credit card companies, rightly or wrongly, have been pressuring members of Congress to tighten the bankruptcy statutes, saying that too many people were willfully spending money they couldn't repay with the intention of avoiding paying the money back by filing for bankruptcy.
    Your Secret Weapon... A Budget
    For many, the word 'budget' immediately sends shivers down the spine. Why in the world would anyone need or want to budget their money?First off, budgeting your money does NOT mean you are poor, or are in need of financial assistance.
    What is Bankruptcy?
    Personal bankruptcy is a legal way to give people with overwhelming debt a fresh financial start. However, it is important to realize that certain forms of debt, such as student loans, are not forgiven through the bankruptcy process.
    Debt Settlement
    What is debt settlement?Debt Settlement is a process to settle your debts with the creditors. With debt settlement, a third party or you yourself negotiate with your creditors to come up with a reduced debt that you agree to pay.
    Personal Bankruptcy: Last Option To Legally Stop Bill Collectors
    Do you have stacks of unpaid bills?Are you in debt?Are bill collectors hounding you?Are you frustrated and annoyed and wish to get them off your back?If you answer yes, then pay close attention.Filing for a personal bankruptcy may be the last option for you.
    Life on a Debt Management Program
    Signing up for a debt management program is easy; it's a matter of finding a company you feel comfortable with that is difficult. There should be no pressure added from the company you speak with, joining a DMP is your decision and you should feel like you are in a partnership with the company, meaning you both have control over your financial situation.
    Bankruptcy: Which Chapter Do I File?
    There is more than one kind of bankruptcy. You should understand your options before deciding which chapter of bankruptcy you are going to file for, or if you are going to file for bankruptcy at all.
    Bankruptcy - Your Fresh Start
    Most American consumers are living too close to the edge. They are carrying too much credit card and mortgage debt and have too little in the way of savings.
    Bankruptcy - The Easy Option?
    Incredibly, since the changes in the bankruptcy law in April 2004, debtors are more likely to petition for their own bankruptcy rather than their creditors! You would think that most people who have been threatened with the prospect of being made Bankrupt would be riddled with fear of the possibility. It is more widely referred to as the "Big B" rather than the dreaded word itself.
    Learn The Five Key Debt Reduction Steps You Must Take Immediately!
    Step 1. The purpose of this first step is to bring you back to reality.
    Debt: Dont Pay Your Minimum Balance
    Almost all Americans carry credit card debt. Actually, over 40% of US families spend more than they earn.
    The 5 Secrets to Getting Out of Debt Fast
    As they stare down at a teetering pile of bills, so many consumers wonder how they racked up such a large debt. The answer boils down to simple mathematics.
    Your Ticket Out of Debt Relief
    If you are in debt over your head and wondering if you will ever find a way out, the answer is yes! Serious financial problems can make life miserable and cause a great deal of stress and worry. Many people have found themselves in the situation of avoiding calls from creditors and wondering how they will ever get out of debt.
    Credit Counseling - Signs That You May Need Help
    Credit counseling is a viable option for those who are feeling the stress of being overwhelmed by debt. Credit counseling primarily offers assistance with working out a credit and debt repayment plan for an individual to gain control of their finances by creating a structured budget for an individual to follow.
    Ten Ways to Get Out of Debt
    1) Use your AssetsIf you have assets with some significant equity, such as a home or a car you may be able to use these to get control of your debt. For example, you could get a loan on your home sufficient to pay off your debts.
    Debt Validation: Do you have to pay ?
    It happens all the time. Debt collectors try to collect on debts that consumers have no knowledge of or never owed in the first place.
    How to Protect Yourself: Debt Collections
    So you are getting collection calls? You're desk is full of unpaid bills. You dread answering the phone.
    Drowning in Debt? Tips and Tricks for Getting Out of Hot Water with Creditors
    Do you, like millions of other Americans, feel like you're sinking in an ocean of credit card debt? Well, fear not--there are many options for reducing your debt way before you have to be concerned about receiving notices or daunting telephone calls from debt collectors. The important thing to remember is to be proactive in handling your credit card debt.
    Is Independence Overrated?
    Happy Independence Day from The Money Motivator!If you don't celebrate "The 4th of July" like we do in the United States, today still presents you with an awesome opportunity to examine your independence.Independence means the quality or state of being dependent.
    Stop Debt Collectors
    Can you stop debt collectors ? . .