Bankruptcy Laws
Bankruptcy Legalities
In 2005 the U.S. was introduced to new bankruptcy laws, which implemented with new bankruptcy laws that passed congress.
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.
Previous to the updated bankruptcy law in 2005, people had the ability to select the code they wanted to file under.
It did not matter the amount of income you made either.
The most obvious change was made in how a person files, based on their income; for example, people that filed for bankruptcy under Chapter 13 of the Bankruptcy Code, have the opportunity to repay some or all the debts in their name, in better terms, i.e. lower or no interest and that is unlike Chapter 7 which involves liquidation of assets.
The law also imposed new restrictions on bankruptcy lawyers.
It may be tougher now to find a lawyer who will represent you in a bankruptcy case.
Another change, is that now people planning to file for personal bankruptcy under chapter 7, must complete the mandatory credit counseling first.
Pre-filing, individuals must complete credit counseling and post-filing and also are required to complete some type of financial budgeting plan.
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.
All disposable income left after paying actual living expenses must now go into their repayment plan.
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.
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